J-S65027-13

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

BARBER'S CHEMICALS, INC., IN THE SUPERIOR COURT OF PENNSYLVANIA

Appellee

v.

RICHARD L. EARNHARDT, THOMAS SIAR,

AND PA POOL SERVICE

Appellants No. 786 WDA 2013

Appeal from the Order May 3, 2013

In the Court of Common Pleas of Mercer County Civil Division at No(s): 2013-1118

BEFORE: FORD ELLIOTT, P.J.E., OTT, J., and WECHT, J.

MEMORANDUM BY OTT, J.: FILED MARCH 28, 2014

Richard L. Earnhardt, Thomas Siar, and PA Pool Service (collectively,

“the Defendants”) appeal from the trial court’s order granting the petition for

a preliminary injunction filed by Barber’s Chemicals, Inc (“Barber’s”).1 The

Defendants raise numerous arguments related to the preliminary injunction.

After careful review of the record, including exhibits, case law, and the

submissions of the parties, we affirm.

Barber’s is a Pennsylvania corporation with a place of business at 950

Main Street, Sharpsville, Mercer County, Pennsylvania. It is in the business

of supplying chemical products and services for commercial and residential

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1 An appeal may be taken as of right from “[a]n order that grants … an injunction[.]” Pa.R.A.P. 341(a)(4).

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swimming pools, water plants, wastewater treatment plants, and industrial

chemical users. Barber’s is currently owned by Lee Earnhardt, who

purchased the company from his father’s estate in 2003. Lee Earnhardt and

Richard Earnhardt are brothers.

Richard Earnhardt owned and operated PA Pool Service until he sold

the company to Barber’s in the fall of 2011. On September 30, 2011,

Barber’s entered into an Asset Purchase Agreement whereby it purchased all

of the assets of PA Pool Service from Earnhardt for $105,000.00. At the

same time, Earnhardt entered into an Employment Agreement with Barber’s

for a term of three years. Both agreements contained various provisions

prohibiting Earnhardt from the following: (1) competing with Barber’s for a

period of five years following the closing date of the PA Pool Service sale; (2)

soliciting the business of any person that is a customer of Barber’s; (3)

making disparaging remarks regarding Barber’s; and (4) disclosing

confidential information and trade secrets without Barber’s consent. See

Plaintiff’s Exhibit 2, Asset Purchase Agreement, § 10.15 and Plaintiff’s

Exhibit 3, Employment Agreement, §§ 7-8.

Siar was an employee at PA Pool Service and followed Richard

Earnhardt to Barber’s after he sold the company.

In January 2013, approximately one year and three months after

entering into the two agreements, Richard Earnhardt left Barber’s and

immediately set up a new competing business, using the same name as his

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previous business, PA Pool Service, which is located at 389 Lyle Drive,

Hermitage, Mercer County, Pennsylvania. He also began soliciting Barber’s

customers. Siar subsequently quit Barber’s and began working for PA Pool

Service.

On April 9, 2013, Barber’s filed a complaint in civil action, alleging

breach of contract claims against PA Pool Service and Richard Earnhardt, as

well as a misappropriation of trade secrets claim against the Defendants.

That same day, Barber’s also filed a motion for preliminary injunction. On

April 23, 2013, the Defendants filed an answer, new matter, and

counterclaim, as well as an answer to Barber’s motion for preliminary

injunction. On April 30, 2013, the trial court held an evidentiary hearing on

the injunction.

Shortly thereafter, the court entered an order granting injunctive relief

with the following provisions:

Now, this 3rd day of May 2013, it is hereby ORDERED that, upon Plaintiff Barber’s Chemicals, Inc., providing security in compliance with Pa.R.Civ.P. 1531(b) in the amount of

$10,000.00, the following provisions shall become effective:

1. Defendants Richard L. Earnhardt and PA Pool Service are hereby ENJOINED from:

A. Engaging in any activity that would violate the Asset

Purchase Agreement;

B. Engaging in any activity that would violate the Employment Agreement;

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C. Operating any competing business within 250 miles of

Barber’s facility at 950 West Main Street, Sharpsville, PA 16150;

D. Operating any competing business using information

obtained from Barber’s;

E. Using, disclosing, or relying upon, in any way or for any purpose, Barber’s Chemicals, Inc.’s proprietary, confidential, and/or trade secret information or any information derived therefrom; and

F. Developing, producing, manufacturing, or marketing any

products or services based on Barber’s confidential, proprietary, or competitively sensitive information or trade

secrets or any materials derived therefrom.

2. Defendant Thomas Siar is hereby ENJOINED from:

A. Using, disclosing, or relying upon, in any way or for any

purpose, Barber’s Chemicals, Inc.’s proprietary, confidential, and/or trade secret information; and

B. Developing, producing, manufacturing, or marketing

any products or services based on Barber’s confidential or proprietary information or trade secrets.

3. This Order shall remain in full force and effect until such time

as this Court specifically orders otherwise.

Order, 5/3/2013, at 1-2 (emphasis in original).2

Prior to Barber’s obtaining a security bond, the Defendants filed a

notice of appeal on May 8, 2013. That same day, counsel for the

Defendants emailed counsel for Barber’s. Citing Goodies Olde Fashion

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2 It should be noted that the May 3, 2013 order was time stamped and filed on May 6, 2013. Additionally, May 3rd fell on a Friday and May 6th on a

Monday.

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Fudge Co. v. Kuiros, 597 A.2d 141 (Pa. Super. 1991), the Defendants

asserted that because their notice of appeal was filed prior to Barber’s

obtaining the security bond, the May 3, 2013 order had been invalidated.

See Email from William G. McConnell, Jr., Esq. to Sarah C. Kellog, Esq.,

5/8/2013.

The following day, Barber’s filed the security bond with the court,

which was approved, and an emergency motion for an amended order out of

concern that the May 3, 2013 order had been invalidated based on the

Defendants’ notice of appeal. On May 10, 2013, the court entered an order

that was substantially similar to its May 3, 2013 order but stated, “This

Order shall be null and void if Plaintiff Barber’s Chemicals, Inc. fails to post

security as specified above on or before May 13, 2013.” Order, 5/10/2013,

at 2.3

The Defendants now raise the following seven issues on appeal:

I. Whether the trial court’s May 3rd injunctive order and May 10th amended injunctive order are nullities and void when

a timely appeal was taken from the May 3rd injunctive

order prior to Barber’s filing the requested bond?

II. Whether the trial court erred in concluding that Barber’s had a protectable business interest in any goodwill or trade

secret purportedly purchased from PA Pool Service so as to justify enforcement of the restrictive covenants?

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3 The Defendants filed a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b). The trial court issued an opinion pursuant to

Pa.R.A.P. 1925(a) on July 8, 2013.

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III. Whether the trial court erred in concluding that Barber’s would sustain immediate irreparable harm not compensable by money damages in the absence of

injunctive relief?

IV. Whether the trial court erred in concluding that greater injury would result from the denial of the injunction than

by granting the injunction?

V. Whether the trial court erred by enjoining [Richard] Earnhardt and Siar from using Barber’s confidential, proprietary or trade secret information in light of the evidence presented?

VI. Whether the trial court erred by concluding that the

restrictive covenants sought to be enforced by Barber’s against [Richard] Earnhardt were supported by adequate consideration[?]

VII. Whether the trial court erred in fashioning an injunction

which was reasonably suited to abate the offending activity?

The Defendants’ Brief at 4-5.

We begin with our well-settled standard of review:

[I]n general, appellate courts review a trial court order refusing

or granting a preliminary injunction for an abuse of discretion. We have explained that this standard of review is to be applied

within the realm of preliminary injunctions as follows:

[W]e recognize that on an appeal from the grant or denial of a

preliminary injunction, we do 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 we interfere with the decision of the

[trial court].

Eckman v. Erie Ins. Exchange, 21 A.3d 1203, 1206-1207 (Pa. Super.

2011) (citation omitted). Moreover,

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[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 . . . .

A decision addressing a request for a preliminary injunction thus

requires extensive fact-finding by the trial court because the moving party must establish it is likely to prevail on the merits.

Synthes USA Sales, LLC v. Harrison, __ A.3d, __, 2013 Pa. Super. LEXIS

4571, ¶¶ 12-14 [12 EDA 2013] (Pa. Super. Dec. 24, 2013) (citations and

quotation omitted).

In the Defendants’ first argument, they complain that both injunction

orders are nullities and void. First, relying on Goodies, supra, they state

the May 3rd order was a legal nullity because it “was self-executing and did

not follow the best practice advised by this Court in Goodies … by setting a

date by which the injunctive order would become null and void should

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Barber’s not file the bond required to make the order an effective

injunction.” The Defendant’s Brief at 14. Likewise, citing Rose Uniforms,

Inc. v. Lobel, 184 A.2d 261 (Pa. 1962), the Defendants contend Barber’s

failed to file a bond contemporaneously with or promptly after issuance of

the injunction in order to prevent nullification. Second, citing Pennsylvania

Rule of Appellate Procedure 1701(a),4 the Defendants state once their notice

of appeal was filed, the court was divested of jurisdiction and could take no

further action in the matter. Therefore, they complain the trial court’s May

10th order is a nullity and void because their timely appeal was taken from

the May 3rd order prior to Barber’s filing the required bond. We disagree

with the Defendants’ argument.

Pennsylvania Rule of Civil Procedure 1531 governs injunctions and

provides in pertinent part:

(b) Except when the plaintiff is the Commonwealth of Pennsylvania, a political subdivision or a department, board,

commission, instrumentality or officer of the Commonwealth or of a political subdivision, 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

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4 Rule 1701(a) provides: “General rule. Except as otherwise prescribed by these rules, after an appeal is taken or review of a quasijudicial order is sought, the trial court or other government unit may no longer proceed

further in the matter.” Pa.R.A.P. 1701(a).

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person injured all damages sustained by reason of granting

the injunction and all legally taxable costs and fees, or

(2) the plaintiff deposits with the prothonotary legal tender of the United States in an amount fixed by the court to be

held by the prothonotary upon the same condition as provided for the injunction bond.

Pa.R.C.P. 1531(b). The bond requirement imposed under Rule 1531(b) has

been interpreted to be mandatory, and an appellate court must invalidate an

injunction if the trial court did not order the plaintiff to file a bond. See

Walter v. Stacy, 837 A.2d 1205 (Pa. Super. 2003); Goodies, supra.

Initially, we note a review of the May 3rd order reveals that it complied

with Rule 1531(b) as it expressly conditioned the effectiveness of the relief

upon Barber’s provided security in the amount of $10,000.00. See Order,

5/3/2013.5

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5 As such, contrary to the Defendants’ claim, Rose Uniforms Inc., supra,

is factually distinguishable from the present matter. In Rose, the initial injunction order did not impose a bond requirement on its face. Four days

later, the trial court corrected the error by writing in a bond requirement. Rose Uniforms Inc., 184 A.2d at 262. The enjoined defendant-appellant

filed a notice of appeal and, four days after this filing, the plaintiff-appellee filed the required bond. Id. The Pennsylvania Supreme Court held the

furnishing of the bond “after the grant of the injunction and the appeal to this court therefrom” did not correct the trial court’s failure to require the bond in the first place. Id. at 263. Here, there was no procedural defect as the trial court did require a bond in its original order.

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Turning to Goodies, a panel of this Court was faced with a plaintiff’s

failure to comply with the trial court’s order that bond be posted and as a

result, injunctive relief was rescinded.6 The Court stated:

[T]his type of injunction, effective when the bond is posted but

not specifying a date by which this must occur, places the defendant in a serious quandary. Uncertain as to when the

plaintiff will post the bond and so make the self-executing order effective, a defendant must abide by the terms of the injunction

without the protection of the bond or engage in the prohibited activities at the risk of a contempt citation.

Goodies, 597 A.2d at 144. The Court, thereafter, held “that the trial judge

should automatically fix a time within which bond must be posted by the

injunction-seeking plaintiff.” Id.

Here, in the May 3rd order, the trial court did not automatically fix a

date upon which the bond was due. However, we note “[i] is well-settled in

Pennsylvania that a trial court has the inherent, common-law authority to

correct ‘clear clerical errors’ in its orders. A trial court maintains this

authority even after the expiration of the 30 day time limitation set forth in

42 Pa.C.S.A. § 5505 for the modification of orders.” Commonwealth v.

Borrin, 12 A.3d 466, 471 (Pa. Super. 2011) (citations omitted), aff’d, 80

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6 The Court reasoned, “[O]f what effect is an order, purporting to be a preliminary injunction, which by its own terms does not become effective

until the required bond is posted, when the Plaintiff fails to post the required bond before an appeal is taken?” Goodies, 597 A.2d at 144.

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A.3d 1219 (Pa. 2013).7 Accordingly, the trial court was permitted to amend

its original May 3rd order to correct the clerical error of failing to include a

date when the bond was due even though the Defendants had filed a notice

of appeal.8

Furthermore, turning to the notice of appeal, we conclude the May 10th

order is also valid based on Pennsylvania Rule of Appellate Procedure

311(h), which provides, in pertinent part: “Further proceedings in lower

court. Rule 1701(a) (effect of appeal generally) shall not be applicable to a

matter in which an interlocutory order is appealed under Subdivision[] …

(a)(4) of this rule.” Pa.R.A.P. 311(h). Here, the Defendants appealed under

Rule 311(a)(4),9 Rule 311(h) imparts that the trial court was not divested of

jurisdiction upon appeal of the injunction.

Moreover, even if Rule 311(h) were not applicable, we find guidance

from Zeigenfuse v. Boltz, 164 A.2d 663 (Pa. 1960). Similar to this case,

the plaintiffs’ injunction was granted on September 26, 1960, but the bond

was not filed until September 30, 1960. In the meantime, the defendant-

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7 42 Pa.C.S. § 5505 provides: “Except as otherwise provided or prescribed by law, a court upon notice to the parties may modify or rescind any order

within 30 days after its entry, notwithstanding the prior termination of any term of court, if no appeal from such order has been taken or allowed.” Id.

8 The court did not make any substantive changes to its original order in the

amended order. 9 See Defendants’ Brief at 1.

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appellants had appealed to the Pennsylvania Supreme Court on September

29, 1960. The Supreme Court stated,

[T]he court order of September 26, 1960, making absolute the

rule for a preliminary injunction and directing that such injunction should issue, was misunderstood by the appellants as

constituting the injunction which [a]ctually, did not issue until September 30, 1960, when the prothonotary executed the writ

of injunction and the plaintiffs filed the required security bond. An order making absolute a rule for judgment or an order

directing the entry of judgment by the prothonotary is interlocutory.

…

Ordinarily, the decree of a court awarding an injunction delineates and defines the enjoining mandate and, thus,

constitutes the injunction which is required to be secured by bond. But where, as here, the court does no more than make

absolute a rule for a preliminary injunction and directs that such injunction shall issue, it is the carrying out of the order by the

issuance of an injunction that becomes appealable. The fact is that the defendants’ appeal in this case preceded the definitive injunction by a day.

Id. at 666 (citations omitted). Instead of remanding the case, the Court

treated the record as amended to show that the appeal was taken on

September 30th instead of September 29th.

Like Zeigenfuse, the injunction at issue did not take effect until May

9, 2013, when Barber’s filed the required security bond and the trial court

approved the bond. See Order, 5/9/2013. Therefore, the Defendants’

appeal in the present matter was premature when it was filed on May 8,

2013 and did not become perfected until May 10, 2013 when the trial court

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entered its amended order and the bond became effective.10 Accordingly,

both injunction orders were valid and the Defendant’s first argument fails.

Next, the Defendants argue the court erred in concluding that Barber’s

had a protectable business interest in any goodwill or trade secret purchased

from PA Pool Service to justify enforcement of the restrictive covenants.

Defendants’ Brief at 18. Specifically, the Defendants state that because the

purpose of including the restrictive covenants in the Asset Purchase

Agreement and Employment Agreement “was to eliminate competition in

order to gain economic advantage, the trial court should have held the

restrictive covenants unenforceable” in accordance with Hess v. Gebhard &

Co., 808 A.2d 912 (Pa. 2002). Id. at 21. Moreover, the Defendants assert

the court erred in finding Barber’s had a protectable business interest in its

trade secrets, including its customer list and alleged inside information. Id.

They state that any customer identity or information was already known to

them “by means independent of their employment with Barber’s.” Id. at 23.

Keeping our standard of review in mind, we note the following:

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10 See Johnston the Florist, Inc. v. TEDCO Construction Corp., 657

A.2d 511, 513 (Pa. Super. 1995) (en banc) (“Thus, even though the appeal was filed prior to the entry of judgment, it is clear that jurisdiction in

appellate courts may be perfected after an appeal notice has been filed upon the docketing of a final judgment.”); see also Keystone Dedicated

Logistics, Inc. v. JGB Enters., 77 A.3d 1, 3 n.1 (Pa. Super. 2013) (quoting same).

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Restrictive covenants are not favored in Pennsylvania, but have

long been held to be enforceable if: (1) they are incident to an employment relationship between the parties; (2) they are

supported by adequate consideration; (3) the restrictions imposed by the covenant are reasonably necessary for the

protection of legitimate interests of the employer; and (4) the restrictions imposed are reasonably limited in duration and

geographic extent. Hess v. Gebhard & Co.., 570 Pa. 148, 157, 808 A.2d 912, 917 (2002); Piercing Pagoda, Inc. v. Hoffner,

465 Pa. 500, 507, 351 A.2d 207, 210 (1976).

Pulse Techs., Inc. v. Notaro, 67 A.3d 778, 784 (Pa. 2013).

“Pennsylvania cases have recognized that trade secrets of an employer, customer goodwill and specialized training and skills

acquired from the employer are all legitimate interests protect[a]ble through a general restrictive covenant.” Thermo-

Guard, Inc. v. Cochran, 408 Pa. Super. 54, 596 A.2d 188, 193-94 (Pa. Super. 1991) (citation omitted). In essence, the

court must examine and balance the employer’s legitimate business interest, the “individual’s right to work, the public’s right to unrestrained competition, and the right to contract ... in determining whether to enforce a restrictive covenant.” Hess,

570 Pa. at 158, 808 A.2d at 917 (citation omitted); see Albee Homes, Inc. v. Caddie Homes, Inc., 417 Pa. 177, 184, 207

A.2d 768, 772 (1965); Thermo-Guard, Inc., 596 A.2d at 193.

In construing a restrictive covenant, “[c]ourts do not assume that a contract’s language was chosen carelessly, nor do they assume that the parties were ignorant of the meaning of the

language they employed. When a writing is clear and unequivocal, its meaning must be determined by its contents

alone.” Murphy v. Duquesne Univ. of the Holy Ghost, 565 Pa. 571, 591, 777 A.2d 418, 429 (2001) (citations and quotation

marks omitted). “[I]t is not the function of this Court to re-write it, or to give it a construction in conflict with . . . the accepted

and plain meaning of the language used.” Robert F. Felte, Inc.

v. White, 451 Pa. 137, 144, 302 A.2d 347, 351 (1973) (citation

omitted).

Synthes USA Sales, LLC, supra, 2013 Pa. Super. LEXIS 4571, ¶¶ 16-17

(Pa. Super. Dec. 24, 2013).

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In Pennsylvania, we utilize the definition of trade secrets

contained in Restatement (Second) of Torts § 757, O.D. Anderson, Inc. v. Cricks, 2003 PA Super 13, 815 A.2d 1063,

1070 (Pa. Super. 2003), which states at comment b:

A trade secret may 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. It

may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern

for a machine or other device, or a list of customers.

“The crucial indicia for determining whether certain information constitutes a trade secret are ‘substantial secrecy and competitive value to the owner.’” O.D. Anderson, Inc., supra,

at 1070 (partially quoting Restatement (Second) of Torts § 757, comment b.). The question of whether information is a trade

secret is determined on a case-by-case basis and can include confidential customer lists. Id. Additionally, a trade secret can

involve “a compilation of information which is used in one’s business” that gives one “an opportunity to obtain an advantage over competitors.” WellSpan Health [v. Bayliss, 869 A.2d 990, 997 (Pa. Super. 2005)] (partially quoting Christopher M's

Hand Poured Fudge, Inc. v. Hennon, 699 A.2d 1272, 1275 (Pa. Super. 1997)). “A trade secret does not include an employee’s aptitude, skill, dexterity, manual and mental ability, or other subjective knowledge. In addition, if a competitor could

obtain the information by legitimate means, it will not be given injunctive protection as a trade secret.” WellSpan Health,

supra at 997 (citations omitted).

Shepherd v. Pittsburgh Glass Works, LLC, 25 A.3d 1233, 1244-1245

(Pa. Super. 2011).

In Hess, as relied upon by the Defendants, the plaintiff started

employment as an insurance agent with an insurance company called

Hoaster, Inc. in 1974. Hoaster was owned by Charles Brooks, Esquire. As

part of his employment, Hess executed an employment agreement, in which

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he agreed not to disclose proprietary information and covenanted not to

compete with Hoaster within a 25-mile radius for a period of five years after

the termination of his employment. Hess, 808 A.2d at 914. In 1996,

Brooks entered into a sales agreement with Gebhard & Co. to sell all the

assets associated with the insurance portion of the business. Id. at 915.

Pursuant to the contract of sale, Brooks sold only the insurance portion of

his business to Gebhard, but retained the real estate operation. Id. The

contract included the sale of all of Hoaster’s then-existing contracts and

agreements, including Hess’s employment agreement. “The agreement also

provided that, for three years after the sale, Hoaster would receive, as part

of the sale price, the commissions and fees earned on the insurance

accounts transferred from Hoaster to Gebhard.” Id.

Subsequently, Gebhard informed Hess that it had decided to eliminate

Hess’s position when Gebhard assumed ownership. Hess then began

employment negotiations with a competing firm in the area. Id. Less than

one week after leaving Hoaster, and while Hess and the potential employer

were in final employment contract negotiations, Hess used information that

he had acquired while at Hoaster's and solicited one of Hoaster's major

clients, as a new client for the firm. Id. Gebhard and Hoaster learned of

this and notified Hess by letter of possible legal action based on the non-

compete agreement if Hess refused to comply. Id. As a result of this

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notification, the firm decided against hiring Hess. Hess then instituted an

action against Gebhard, who joined Hoaster. Id.

The issue on appeal was whether a restrictive covenant not to compete

in an employment contract is assignable by the former employer to a

purchaser of the assets of the employer’s business. Hess, 808 A.2d at 919.

The Pennsylvania Supreme Court held that “a restrictive covenant not to

compete, contained in an employment agreement, is not assignable to the

purchasing business entity, in the absence of a specific assignability

provision, where the covenant is included in a sale of assets.” Id. at 922.

Hoaster and Gebhard then tried to argue “in the alternative that, if the

assignment [was] invalid and Gebhard may not enforce the covenant, then

Hoaster may enforce the non-competition covenant against Hess … because

Hoaster continue[d] to possess an interest in Gebhard's retention of

Hoaster’s former insurance clients, [and] the covenant not to compete [was]

still valid, as long as it [was] reasonable.” Id. at 923.

The Supreme Court disagreed with this argument, concluding:

Hoaster has not demonstrated that the information it seeks to

protect, mainly its prices and customer lists, is particular or unique to its business and deserves protection as a trade secret

or confidential information. In point of fact, there are no trade secrets or proprietary information relative to Hoaster’s prior insurance business that are germane to the conduct of the current real estate business of Hoaster. Moreover the potential

customers that were available to Hoaster’s insurance business were the same as those that were available to Gebhard or to any

other insurance agency operating in Lebanon County and the identities of potential clients were widely known and easily

available…. Because Hoaster cannot demonstrate that

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confidential information is at issue and, because Hoaster has

sold the insurance accounts and is no longer in the insurance business, Hoaster has no legally protectible business interest in

those insurance accounts. Without a protectible business interest, Hoaster may not enforce the covenant not to compete.

Id. at 923-924.

We find that Hess is distinguishable for several reasons and therefore,

not controlling in the present matter. First, the issue on appeal in Hess

concerns the assignability of a restrictive covenant. Second, the trade

secret information at issue in Hess was relative to the defendant’s prior

insurance business and not his current real estate business and therefore, he

had no legally protectable business interest in those insurance accounts.

Whereas, here, assignability of the covenant is not at issue, and more

importantly, the confidential information was germane to Barber’s business.

Therefore, we must now determine whether Barber’s had a protectable

business interest in this information.11

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11 To the extent that the Defendants rely on Hess for the principle that “[i]f the covenant is inserted into the agreement for some other purpose, as for

example, eliminating or repressing competition or to keep the employee from competing so that the employer can gain an economic advantage, the

covenant will not be enforced,” we decline to agree. Id. at 920-21.

As noted in Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412 (3d Cir. Pa. 2010),

this language in Hess is purely dicta. The legal issue in Hess was

the assignability of a restrictive covenant in an asset sale. Although the court made various forays into the legitimacy of the

business interests, it does not purport to analyze or apply the (Footnote Continued Next Page)

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As indicated by the trial court,12 Richard Earhardt admitted at the

injunction hearing that he had directly contacted Barber’s customers and

informed those individuals that many customers were dissatisfied with

Barber’s service:

Q Okay. And, in fact, you’ve sent letters to those customers; is that correct?

A I did send letters.

…

Q Did you say that Barber’s Chemicals was not providing proper service?

A What I said in my letter was that I had received phone calls, e-mails, and letters from the majority of those

customers stating that they were dissatisfied with the service that was provided under Barber’s, and I was acknowledging that my reputation as a pool service person had been disparaged by my relationship with Barber’s. That was the crux of the letter.

(Footnote Continued) _______________________

off-hand statement quoted by [the appellant]. Second, [the appellant] suggests that this language applies to [the appellee]’s conduct without engaging the body of Pennsylvania case law

holding that goodwill and specialized training are protectable interests.

Id. at 425. We agree with Zambelli that this language is dicta and need

not address it further. Further, we note “decisions of the federal district courts . . . are not binding on Pennsylvania courts[.]” Kubik v. Route 252,

Inc., 762 A.2d 1119, 1124 (Pa. Super. 2000) (citation omitted). Nevertheless, Zambelli is persuasive authority and helpful in our review of

the issue presented. 12 See Trial Court Opinion, 7/8/2013, at 8-9.

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Q So, in your letter to Barber’s customers, you were acknowledging problems with Barber’s services?

A I was acknowledging their complaints about those services.

Q And you were soliciting those Barber’s customers to come

to … Pennsylvania Pool Services.

A At that point, yes.

N.T., 4/30/2013, at 79-80.

The trial court found Richard Earnhardt “has used Barber’s customer

list and ‘inside information’ about potential problems with Barber’s service to

obtain customers for PA Pool Service.” Trial Court Opinion, 7/8/2013, at 9.

We agree.

We note “‘[c]ustomer information in particular may be subject to such

[(trade secret)] protection.’” A.M. Skier Agency, Inc. v. Gold, 747 A.2d

936, 940 (Pa. Super. 2000), quoting Bell Fuel Corp. v. Cattolico, 544 A.2d

450, 460 (Pa. Super. 1988), appeal denied, 554 A.2d 505 (Pa. 1989).

Whether such information is protected depends upon the

circumstances of its creation. We have previously held that:

[i]n many businesses, permanent and exclusive

relationships are established between customers and salesmen. The customer lists and customer information

which have been compiled by such firms represent a material investment of employers’ time and money. This information is highly confidential and constitutes a valuable asset. Such data has been held to be property in the

nature of a ‘trade secret’ for which an employer is entitled to protection, independent of a non-disclosure contract.

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Robinson Elec. Supervisory Co. v. Johnson, 397 Pa. 268,

154 A.2d 494, 496 (1959) [] (quoting Morgan’s Home Equip. Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838, 842 (1957))[.]

A.M. Skier Agency, Inc., 747 A.2d at 940 (additional citation omitted)

(emphasis deleted).

Contrary to the Defendants’ argument, the trade secret information at

issue did not pertain just to customer address lists but also Barber’s

performance in the pool service industry. Richard Earnhardt was only able

to obtain this inside information by working for Barber’s, and would not have

been privy to it otherwise. He then used this “opportunity to obtain an

advantage” by sharing the negative information with Barber’s customers in

attempt to persuade them to hire his company. See WellSpan Health,

supra. Accordingly, the trial court did not err in finding the restrictive

covenant was reasonably necessary to protect Barber’s business interests.

Therefore, the Defendants’ second argument fails.

In the Defendants’ third issue, they claim the court erred in concluding

that Barber’s would sustain immediate irreparable harm that was not

compensable by money damages in the absence of injunctive relief. The

Defendants’ Brief at 23. They state that, as set forth in Greenmoor, Inc. v.

Burchick Constr. Co., 908 A.2d 310 (Pa. Super. 2006), one must present

concrete evidence of actual proof of irreparable harm. The Defendants

contend the trial court “presumed irreparable injury from the nature of the

business and the breach of the covenant, in light of the fact that the record

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was devoid of concrete evidence of actual proof of injury.” The Defendants’

Brief at 26. Likewise, the Defendants state the testimony of Lee Earnhardt

from the April 30, 2013 injunction hearing failed to include any evidence of

irreparable harm and “consisted of an incantation of a series of mere

conclusory statements,” in which he alleged that Barber’s “had suffered, or

might suffer in the future, a loss of revenue, a loss of profits, a loss of

reputation, and that there existed ‘confusion in the market place’” as a result

of the Defendants. Id. at 28. Moreover, they argue there is no evidence of

confusion in the market place with respect to the Defendants’ use of the

name, PA Pool Service, because Barber’s never used the name after

purchasing the assets of the company and “never associated any of its

products or services with the name[.]” Id. at 32. Lastly, the Defendants

assert “any claim by Barber’s that it has suffered a loss of revenues or

profits as the result of Richard Earnhardt soliciting Barber’s customers in

violation of the restrictive covenants is clearly compensable in money

damages[.]” Id.

With respect to this issue, we are guided by the following:

An injury is regarded as “irreparable” if it will cause damage which can be estimated only by conjecture and not by an accurate pecuniary standard. Our courts have held, accordingly,

that it is not the initial breach of the covenant which necessarily establishes the existence of irreparable harm but rather the

unbridled threat of the continuation of the violation, and incumbent disruption of the employer’s customer relationships. Thus, grounds for an injunction are established where the

plaintiff’s proof of injury, although small in monetary terms,

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foreshadows the disruption of established business relations

which would result in incalculable damage should the competition continue in violation of the covenant. The effect of

such disruption may manifest itself in a loss of new business not subject to documentation, the quantity and quality of which are

inherently unascertainable . . . . Consequently, the impending loss of a business opportunity or market advantage also may be

aptly characterized as an “irreparable injury” for purposes of equitable relief.

York Group, Inc. v. Yorktowne Caskets, Inc., 924 A.2d 1234, 1242 (Pa.

Super. 2007), quoting West Penn Specialty MSO, Inc. v. Nolan, 737 A.2d

295, 299 (Pa. Super. 1999) (citations omitted).

Pennsylvania courts have previously concluded that impending or

actual use of a former employer’s trade secrets at an opponent firm to gain

an advantage cannot be remedied through monetary damages and are “the

types of harm that are not subject to exact valuation and compensation

through damage awards.” Den-Tal-Ez, Inc. v. Siemens Capital Corp.,

566 A.2d 1214, 1233 (Pa. Super. 1989). See also John G. Bryant Co. v.

Sling Testing & Repair, Inc., 369 A.2d 1164, 1169 (Pa. 1977) (“The

covenant seeks to prevent more than just the sales that might result by the

prohibited contact but also the covenant is designed to prevent a

disturbance in the relationship that has been established between [the

business] and their accounts through prior dealings. It is the possible

consequences of this unwarranted interference with customer relationships

that is unascertainable and not capable of being fully compensated by

money damages.”); West Penn Speciality MSO, Inc., 736 A.2d at 299

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(holding that doctor’s “defection” to a competing hospital both “damaged”

the former employer’s “existing patient relationships and imposed a

substantial competitive disadvantage” on the former employer, which

resulted in injury that cannot be calculated in monetary terms, and even

though “the potential extent of the resulting drain” on the former employer’s

patient base could not be estimated with any degree of certainty, “it clearly

would pose a source of injury not calculable by an ‘accurate pecuniary

standard.’”).

At the injunction hearing, Lee Earnhardt testified he had lost

customers to PA Pool Service. N.T., 4/30/2013, at 27. He also stated:

There have been many concerns, there have been many issues. One of the most important issues is our loss of reputation.

We’ve been in business for many, many years, and these letters that have gone out certainly are indicating that potentially we

don’t do an appropriate job.

. . . .

Other -- other concerns that have been significant, there’s obviously the loss of revenue. There is the loss of profit. There

are employees who continue to be employed with not nearly the

amount of work that we had at one time. I will need to make decisions about what to do with those employees, so their jobs,

their livelihood, is on the line. Again, the confusion in the marketplace makes it difficult for customers to understand

what’s going on. That in itself is damaging to our reputation. We’ve had a very long and a very good reputation and that’s something that we are very concerned about.

So all of these reasons I believe to be significant reasons and I – I’m concerned about the -- about the employees and

being able to have them have opportunities to continue to work.

. . . .

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Your Honor, I believe that, in fact, Your Honor, based on how we’ve competed in the past, I believe that only -- that we will

have continued loss of revenue, that our -- our name will continue to be maligned, and unless there is injunctive relief, I

believe that this will be an ongoing difficult problem to deal with. And these -- these agreements, in my mind, were in place to

prevent that from happening. Everything that we have done was contingent upon these agreements, and unless there is

injunctive relief, I’m not certain how we’ll be able to --

Will we be able to move forward? We will. But there will always be continued -- we will -- we will continue to have

difficulty and lack of -- a loss of reputation and the confusion in the marketplace I believe to be -- will be irreparable to our -- to

our reputation as we move forward.

Id. at 28-30.

The trial court aptly found:

Defendants’ operation of a business with the name of PA Pool Service and Defendants’ solicitation of Barber’s customers could have a substantial long term negative impact on Barber’s business. If Barber’s were to try and recover money damages for the injuries done to its reputation and the confusion of its

business with Defendants’, Defendants would be sure to claim that such injuries were speculative and hypothetical, and fight

any recovery on that basis. Given the intangible nature of the loss of reputation and trade confusion, it is clear that money

damages … could not compensate Barber’s for its losses.

Trial Court Opinion, 7/8/2013, at 5.

We agree and find Barber’s met its burden of proving irreparable

harm. Based on Den-Tal-Ez, Inc. and West Penn Speciality MSO, Inc.,

Lee Earnhardt’s testimony clearly establishes Barber’s was concerned about

the loss that it had already suffered and the impending loss of a business

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opportunity as a result of the Defendants’ actions, and therefore, was not

hypothetical or speculative. See also York Group, Inc., supra.13

Furthermore, we find Defendant’s reliance on Greenmoor, Inc.,

supra, is misplaced as the facts in that case are distinguishable from the

present matter. In Greenmoor, Inc., the appellee subcontracted with the

appellant to perform the asbestos removal and abatement component of a

renovation project. There was one contract for each of the five phases.

During the second phase, the appellee was dissatisfied with the appellant’s

work and terminated the company. The appellant filed suit and requested

injunctive relief. On appeal, one of the issues was whether the appellant

had presented “concrete evidence” demonstrating “actual proof of

irreparable harm.” Greenmoor, Inc., 908 A.2d at 314. Both parties

presented evidence on the issue, including a defense expert witness. A

panel of this Court first noted the loss of work for the appellant on the

remaining phases of the project constituted a monetary loss that “was ____________________________________________

13 Moreover, to the extent the Defendants assert there is no evidence of

confusion in the market place with respect to the Defendants’ use of the name, PA Pool Service, because Barber’s never used the name after purchasing the assets of the company, we find this argument is misplaced as it relates to trademark infringement law and not preliminary injunctions and

irreparable harm. See Defendants’ Brief at 30. Additionally, we note Defendants ignore evidence that was presented at the hearing that

demonstrated confusion as to whether the two companies were independent or the same company. Specifically, a link to PA Pool Service’s website was inserted on Barber’s own webpage and an internet search for Barber’s would automatically redirect an individual to the PA Pool Service webpage. See

N.T., 4/30/2013, at 25-27.

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compensable via an action at law for breach of contract and a subsequent

money judgment.” Id. at 315. Moreover, this Court concluded that

although the project caused the appellant to forego other contracts, its

decision not to bid on the other projects did not “constitute ‘concrete

evidence’ of irreversible harm” to the appellant “because [the appellant]’s

decision not to bid on those projects had nothing to do with any wrongful

conduct on [the appellee]’s part, and, therefore, the loss of those possible

projects cannot be attributable to [the appellee]’s termination of [the

appellant.]” Id. Further, the Court indicated the appellant “provided little

demonstrable evidence to indicate whether [it] would close its doors as a

result of the lost business prospects.” Id.

Here, unlike the facts in Greenmoor, Inc., there is direct correlation

between the losses of clients for Barber’s and Richard Earnhardt’s actions.

Moreover, Lee Earnhardt’s testimony amounted to more than just mere

speculation about Barber’s livelihood, where he testified about the loss of

clients, the future for employees of the business, and the loss of a good

reputation in the community due to Richard Earnhardt’s negative remarks.

Accordingly, the trial court did not err in finding that the failure to enforce

the restrictive covenant would result in irreparable harm that could not be

compensated by money damages.

In the Defendants’ fourth issue, they merely state that in light of the

broad and comprehensive scope of the trial court’s injunction order, Richard

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Earnhardt and Siar “are suffering substantially more injury as the result of

the granting of the injunctive relief than Barber’s would have suffered had

the injunctive relief been denied.” The Defendants’ Brief at 33. The

Defendants offer no factual support or case law for this bald assertion of

court error. As such, they present no basis upon which to disturb the

decision of the trial court.14

In issue five, the Defendants again baldly assert Barber’s did not own

or possess any protectable trade secrets or confidential information so as to

justify the injunction because none existed. They state Richard Earnhardt

and Siar just “cleaned and maintained swimming pools which they had done

for years prior to being employed by Barber’s.” The Defendants’ Brief at 33-

34. As discussed in our analysis of the Defendants’ second argument, see

supra, we agree with the trial court that Barber’s did own and possess ____________________________________________

14 Moreover, even if the Defendants had properly preserved this issue, they would be granted no relief as the trial court properly stated:

Defendants are incorrect …. The injury for Barber’s is that if Defendants are allowed to violate the non-compete clauses,

Barber’s will lose its benefits of the bargain in both the Asset Purchase Agreement and the Employment Agreement, as well as

suffer the intangible injuries already discussed, such as trade confusion and loss of goodwill. Frankly, however, the amount

and type of injury to Barber’s is largely irrelevant because Defendant Richard L. Earnhardt is suffering no injury as a result

of the preliminary injunction, as being forced to comply with one’s contractual obligations is not a legally cognizable injury. If

it were, no contract could ever be judicially enforceable.

Trial Court Opinion, 7/8/2013, at 5 (italics removed).

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protectable trade secrets and confidential information. Moreover, Richard

Earnhardt and Siar were not merely cleaning pools where Richard Earnhardt

admitted that he was soliciting Barber’s customers and sharing the negative

information about Barber’s with its customers in attempt to persuade them

to employ PA Pool Service. Therefore, this argument is unavailing.

In the Defendants’ sixth issue, they contend the court erred in finding

that the restrictive covenants were supported by adequate consideration as

legally required for their equitable enforcement. Specifically, they state:

[W]hile Section 2.1 of the [Asset Purchase Agreement] identifies the assets to be sold and Section 2.3 of the [Asset Purchase

Agreement] reflects that the consideration to be paid by Barber’s for the assets as being $105,000.00, it is clear from a review of

the [Asset Purchase Agreement] that this amount was allocated only to the physical assets purchased by Barber’s under the [Asset Purchase Agreement], including PA Pool Service’s equipment, vehicles, inventory and supplies as the same are

specifically itemized and valued on the Master List attached to the [Asset Purchase Agreement] in the amount of $105,000.00.

A review of the [Asset Purchase Agreement] does not

reflect that actual consideration was given or paid to Richard Earnhardt or PA Pool Service for either the restrictive covenant

contained in the [Asset Purchase Agreement] or for any of the

other following assets to be sold as listed in Section 2.1 of the [Asset Purchase Agreement,] PA Pool Service’s customer list, third party contracts, as well as any transferred confidential information, trade name, trade secrets, or intellectual property

asset.

The Defendants’ Brief at 34-35 (record citations omitted). They also add

that Section 2.4 of the Asset Purchase Agreement requires that the purchase

price be allocated and since no consideration was given or paid, no allocation

of the purchase price was made beyond that contained in the Master List.

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Lastly, they argue Barber’s breached the payment terms of the Employment

Agreement by discontinuing Richard Earnhardt’s compensation under the

agreement in the absence of an “event of termination,” and also breached

other express terms of the Employment Agreement.

As noted above, the second element required for a restrictive covenant

to be enforceable is that the agreement is supported by adequate

consideration. See Pulse Techs., Inc., 67 A.3d at 784. “Consideration is

defined as a benefit to the party promising, or a loss or detriment to the

party to whom the promise is made.” Hillcrest Found. v. McFeaters, 2

A.2d 775, 778 (Pa. 1938) (quotation marks omitted). See also Delaware

Valley Factors, Inc. v. Ronca, 660 A.2d 623, 625 (Pa. Super. 1995)

(“Courts generally will not inquire into the value of consideration where it is

clear that adequate consideration exists[.]”).

Here, the trial court found the following:

There are two restrictive covenants at issue. The first is part of the Asset Purchase Agreement and the second is part of

the Employment Agreement. Thus, Defendants must prove that

both covenants are unenforceable because they each were not supported by adequate consideration. In other words, if either

the Asset Purchase Agreement covenants or the Employment Agreement covenants are enforceable, then this Court’s injunction is proper.

The first restrictive covenant, in the Asset Purchase Agreement, was supported by the consideration Barber’s paid

when it purchased essentially all of PA Pool Service’s assets. At the hearing, Defendants attempted to make much of the fact

that there was no line item value ascribed to the restrictive covenant in the asset allocation portion of the Asset Purchase

Agreement. However, it is clear that the allocation was done for

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tax purposes, not to accurately portray the value the parties

gave to each asset:

Q And what was the purchase price that you paid for these assets?

A $105,000.

Q Okay. And was that purchase price allocated to the

various assets?

A Yes, it was.

Q That purchase price was – was for all of the assets?

A All of the assets.

Q Okay. It was not broken down to specific assets.

* * *

THE WITNESS: There – there is – it was necessary for

accounting purposes to – to have a list, but in terms of this, that list representing the only assets that were

purchased, the assets that were purchased were all of the items – all of the assets that are delineated in the

Asset Purchase Agreement.

[N.T., 4/30/2013, at 16-17]. Lee Earnhardt also testified that the whole purpose of Barber’s purchase of PA Pool Service was to eliminate competition:

Q Why was that non-competition provision in the

agreement?

A It was obvious that we’d been competing before this point. We wanted to, umm, stop competing. The – the

purpose of purchasing the business was to discontinue the competition, and so the, umm – the purposes was

that we wanted to protect our investment, we wanted to make sure that – and really the deal was contingent

upon making sure that we eliminated the competition.

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[N.T., 4/30/2013, at 18-19]. Thus, the non-competition

provisions of the Asset Purchase Agreement were supported by adequate consideration.

Even if the Asset Purchase Agreement covenants were not

supported by adequate consideration, there is still the second restrictive covenant. The second restrictive covenant is part of

the Employment Agreement. “Our courts have consistently held that the taking of employment is sufficient consideration for a

restrictive covenant.” Modern Laundry & Dry Cleaning Co. v.

Farrer, 536 A.2d 409, 411 (Pa. Super. Ct. 1988). Defendant

Earnhardt admitted that his employment by Barber’s was pursuant to the Employment Agreement. Thus, the restrictive

covenant was ancillary to that agreement, and the mere fact of employment is sufficient consideration.

Trial Court Opinion, 7/8/2013, at 9-11 (emphasis in original; some italics

removed).

The record supports the above findings of the trial court and the

Defendants offer no authority to the contrary. We emphasize that only one

agreement needs to be enforceable to support the injunction and valid

consideration was found in the form of Richard Earnhardt’s employment with

Barber’s where the restrictive covenant was “a contingency set forth in the

initial employment contract mandated before the commencement of

employment.” Pulse Techs., Inc., 67 A.3d at 786. As such, the trial court

did not err in finding that the restrictive covenants were supported by

adequate consideration. Accordingly, the Defendants’ sixth argument fails.

Lastly, the Defendants claim the preliminary injunction was not

reasonably suited to abate the offending conduct because it “was much

broader than necessary in its scope in order to abate the ‘trade confusion’

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and loss of reputation concerns that were interrelated and based upon

Richard Earnhardt’s use of the name ‘PA Pool Service.’” The Defendants’

Brief at 37. Moreover, they state that because Barber’s customer list and

data were not a legally cognizable trade secret, the court was not justified in

prohibiting Richard Earnhardt from working in the swimming pool service

and maintenance business at all within the temporal and geographical scope

of the preliminary injunction.

The Defendants again provide no authority to support this argument.

As the trial court properly indicated:

Defendant “PA Pool Service” does not appear to be an entity independent from Defendant Earnhardt and Defendant Siar. It

thus does not appear to have any trade to practice or living to make. The injunction does not prohibit Defendant Siar from

owning or operating a pool servicing business (assuming that is, indeed, his “trade”) or from using the name “PA Pool Service.” Defendant Earnhardt is, of course, prohibited from practicing his “trade” of operating a pool servicing business, as such a prohibition was contained in both the Asset Purchase Agreement under which he received $105,000 and the Employment

Agreement under which he received employment. The injunction is thus no broader than the non-compete covenants at issue.

Trial Court Opinion, 7/8/2013, at 13 (italics removed). The record supports

the trial court’s findings. Therefore, the Defendants’ final claim merits no

relief. Accordingly, we conclude the trial court did not err in granting

Barber’s petition for a preliminary injunction against the Defendants.

Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 3/28/2014