HILL v. BEST MEDICAL INTERNATIONAL, INC.

Filing 164

MEMORANDUM OPINION re: 117 MOTION for Summary Judgment filed by ACCURAY, INC., 137 MOTION for Summary Judgment filed by ROBERT W. HILL, 139 MOTION for Summary Judgment filed by JOHN DAVID SCHERCH, MARCUS D. BITTMAN, DAVID SPELLMAN. Signed by Judge William L. Standish on 10/24/2011. (Attachments: # 1 Continuation of Memorandum Opinion) (md)

entice him away from BMI in order to get a market advantage as the
latter claims.

BMI concedes as much when it argues that Hill "was

interested enough to spend his own money to fly to CaliforniaN to
interview with Accuray.

(Doc. No. 148 at 11-12.)

The lack of any

evidence to support the tortious interference claim is even more
telling

when

Stipulated

one

takes

Order

of

into

March

account

25,

2008,

the

fact

BMI

that

had

under

access

the

to

any

correspondence between Hill and Accuray for the period July through
October 2007, when one could expect any acts which might constitute
interference to have occurred.
nally,

(See Doc. No. 8,

~

5.)

the Court has been unable to identify any evidence

whatsoever to indicate Hill was in contact with any of the other
three BMI employees before they joined Accuray, and BMI has failed
to address this claim in its brief opposing summary judgment.
No.

128 at 7.)

Inc.,

supra,

a

Unli ke the facts of Bro-Tech Corp.
case

on which

BMI

relies

heavily,

v.

(Doc.

Thermax,

there

is

no

evidence that Hill recommended that Accuray hire the other three
BMI employees or that the Individual Defendants were in contact
with Hill before or a

er he left BMI.

the Stipulated Order of November 4,
correspondence

between

employed by BMI/NOMOS
should have

Defendants

Since under the terms of

2008,
and

BMI had access to all

Accuray

while

(see Spellman Case, Doc. No. 15,

they
~

were

6), BMI

been able to readily identify any correspondence from

Accuray employees,

including Hill,
51

which reflected an intent to

interfere with any employment contracts with BMI/NOMOS. 26
Summary judgment is granted in favor of Accuray and Hill on
Count I.
E.

Count VI -- Aiding and Abetting

Breach of Fiduciary Obligations by Accuray

1.

EMI's claims:

BMI contends that Accuray and John

Does 1 through 5 aided and abetted the breach by the Individual
Defendants of the latter's fiduciary duty of loyalty to act in the
best

interests

of

BMI

regarding all matters

relating

to

their

employment, in particular their duty to protect BMI's Confidential
Information.
duty

by

The Individual Defendants violated their fiduciary

misappropriating

providing it to Accuray.
by "providing money,

BMI's

Confidential

and

Accuray aided and abetted this violation

expenses and stock options as an inducement

and award" to the Individual Defendants to
employment with BMI;

Information

(1)

terminate their

(2) encourage them to "disclose and divulge"

BMI's Confidential Information;

(3) allow Accuray to take advantage

of the information divulged; and (4) permit Accuray to obtain an
unfair compet
harm it.

ive market advantage against BMI and intentionally

(Accuray Case, Complaint,
2.

Accuray's

arguments:

~~

147-154.)
Accuray

argues

that

since

One could also argue that this claim, insofar as it applies to Hill,
is barred by the gist of the action doctrine since his employment
agreement with NOMOS prohibited him from interfering with the
relationship between NOMOS and any of its employees or attempting to
induce them to terminate their employment and become employed by others
in the same or similar business as NOMOS.
(Doc. No. 156, en 6(d).)
26

52

Bittman,

Scherch,

and

Spellman

were

computer

programmers,

managers or executives bound by fiduciary duties,

it

not

stands to

reason that Accuray cannot have aided and abetted breach of a duty
which did not exist.

Moreover, BMI has raised no claims of breach

of fiduciary duty against those Defendants.

Even in the case of

Hill, who was a vice president of BMI and therefore could have been
considered a fiduciary,

the breaches identified by BMI pertain only

to actions he took related to the Alleged Trade Secrets,

i. e. ,

copying and retaining the information and using or intending to use
it on his own behalf or for the benefit of Accuray.
insofar as this claim is based on breach of

Therefore,

duciary duty by Hill,

any aiding and abetting claim is pre-empted by the PUTSA claim.
(Doc. No. 119 at 23-24; Doc. No. 132 at 17-18.)

Relevant law:

3.
action

for

aiding

and

Pennsylvania recognizes a cause of

abetting

a

breach

of

a

fiduc

ry

duty.

Laufen Int'l, Inc. v. Larry J. Lint Floor & Wall Coverings, CA No.
10-199, 2010 U.S. Dist. LEXIS 41173, *14
The Restatement

(2d)

of Torts,

§

876,

claim for civil aiding and abetting:

(W.O. Pa. Apr. 27, 2010).

sets out the elements

a

one is subject to liability

for harm to a third person from the tortious conduct of another
when he:
(a) Does a tortious act in concert with the other or
pursuant to a common design with him, or
(b) Knows that the other's conduct constitutes a breach
of duty and
gives
substantial
assistance
or
encouragement to the other to so conduct himself,
53

or
(c)

Gives substantial assistance to the other in
accomplishing a
tortious
result
and his own
conduct,
separately considered,
constitutes
a
breach of duty to the third person.

See Bancorp Bank v. Isaacs, CA No. 07-1907, 2010 U.S. Dist. LEXIS
28282, *20 (E.D. Pa. Mar. 25, 2010).
In order for the plaintiff to establish a breach of the duty
of loyalty on the part of the defendant, the plaintiff must first
establish that a fiduciary or confidential relationship existed.
Baker v.

Family Credit Counseling Corp.,

(E.D. Pa. 2006).

440 F. Supp.2d 392,

414

The plaintiff must also establish that (1) "the

defendant negligently or intentionally failed to act in good faith
and solely for the benefit of plaintiff in all matters for which he
or she was employed;

(2)

(3)

failure

the defendant's

that the plaintiff suffered injury; and
to

act

solely for

the plaintiff's

benefit was a real factor in bringing about plaintiff's injuries."
Baker, 440 F. Supp. 2d at 414-15.

4.

Discussion and conclusion:

BMI argues that the duty

of an employee to an employer is "separate and apart from any trade
secret issue," but does not identify any duty other than to protect
BMI's

Confidential

Information and the

breach of that

duty by

misappropriating and providing such information to Accuray.

It

states flatly that Accuray "assisted and encouraged the Defendant's
[sic] in their breach of Fiduciary Duty to Best Medical," but fails
54

to identify a single such act of assistance or encouragement.
Doc. No.
Hill's

128 at 9-10, Doc. No.
breach

of

his

148 at 14-15.)

fiduciary

duty

to

(See

BMI contends that

BMI/NOMOS

was

"not

contractual in nature but rather tortuous [sic]" and that BMI may
"recover from tortuous [sic] activity by Mr. Hill that is outside
the scope of a contractual relationship."

(Doc No. 148 at 14.)

The problem with BMI's argument is that it fails to identify any
breach by Hill other than his purported misappropriation of the
Alleged Trade Secrets.

That is,

BMI has not alleged, much less

provided evidence of, any other instance in which Hill

iled to

act in good faith and solely for the benefit of BMI while he was
employed there. 27
As Accuray argues, in the absence of any evidence that any of
the Individual Defendants breached his fiduciary duty to BMI, it
necessarily follows that Accuray cannot be held liable for aiding
and abetting a breach which did not occur.

We there

grant

summary judgment to Accuray on Count IV.
F.

Count II
Conspiracy by Accuray
and the Individual Defendants
1.

conspiracy

BMI's
with

BMI

claims:

John

Does

Defendants, established an

1

alleges

through

5

that
and

Accuray,
the

in

a

Individual

fice in the Pittsburgh, Pennsylvania,

27
We also agree with Hill that this claim, as applied to him, is barred
by the gist of the action doctrine discussed in Section V.E.3 below since
the duty of confidentiality arose from the agreement he had with NOMOS.

55

area

for

the

purpose

of marketing and developing products

services that compete with its own.
115.)

and

(Accuray Case, Complaint,

~

The scope of the conspiracy was basically co-extensive with

the plan to unfairly compete with BMI,

that is, Accuray and the

Individual Defendants conspired for the latter to leave BMI and go
to

work

for

Information

Accuray;
and

turn

for
it

them
over

to
to

steal

BMI's

Accuray;

and

Confidential
to

information in a scheme to inflict financial harm on BMI.

use

that
~~

Id.,

125-129.)

2.

Defendants' arguments:

Accuray contends that the

record is wholly devoid of facts establishing any alleged act in
furtherance of the conspiracy or suggesting that Accuray acted with
actual malice.
which suggests

Moreover,
it

is

the claim is unsupported by evidence

based on anything other than the alleged

misappropriation of BMI's trade secrets;

thus,

once again PUTSA

preemption of this claim is appropriate.

(Doc. No. 132 at 16.)

Hill argues that the conspiracy claim must fail because, at a
minimum, BMI has not come forward with evidence of any underlying
unlawful acts or lawful acts done by unlawful means.

In addition,

BMI has failed to introduce evidence of a common purpose among
Defendants or damages arising from the purported conspiracy.
No.

137,

~

10;

Doc.

No.

138 at 18-20.)

Bittman,

Scherch,

Spellman raise essentially the same arguments as Hill.
140 at 6-7; Doc. No. 157 at 8-9.)
56

(Doc.
and

(Doc. No.

Relevan t

3.

law:

To

succeed

on

a

claim

of

civil

conspiracy, the plaintiff must show:
(1) a combination of two or more persons acting with a
common purpose to do an unlawful act or to do a
lawful act by unlawful means;
(2) an overt act
purpose; and

done

in

pursuance

of

the

common

(3) actual legal damage.
Gen. Refractories Co. v. Fireman's Fund Ins. Co., 337 F.3d 297, 313
(3d Cir. 2003), quoting Strickland v. Univ. of Scranton, 700 A.2d
979, 987-988

(Pa. Super. Ct. 1997).

The plaintiff must also corne forward with proof of malice,
i.e., an intent to injure.
A.2d 466, 472

Thompson Coal Co. v. Pike Coal Co., 412

(Pa. 1979); see also Doltz v. Harris & Assocs., 280

F. Supp.2d 377, 389 (E.D. Pa. 2003)

(there must be proof of malice,

i.e., evidence to support the claim that "that the sole purpose of
the

conspiracy

was

to

injure

the

plaintiff.")

Finally,

the

plaintiff must identify the independent, underlying wrong or tort
about which the defendants conspired.
~,

Levin v.

No. 03-1860, 2004 U.S. App. LEXIS 4457, *39 (3d Cir. Mar. 8,

2004)

(citations

Dist.

LEXIS 33463 at *18

see also Ideal Aerosmith,

omitted);

07-1750,

2008)

2008 U.S.

2008

U.S.

(claim of unfair competition supported

civil conspiracy claim); Binary Semantics Ltd.
No.

Upper Makefield

Dist. LEXIS 28602,

(claims of fraudulent

*37

v. Minitab,
(M.D.

Inc.,

Pa. Mar.

20,

inducement and conversion supported
57

civil conspiracy claim.)
4.

Discussion and conclusion:

Although not discussed

in its opposition to Accuray's motion except to point out that its
conspiracy allegations "have nothing to do with trade secrets" (see
Doc.

No.

128 at 7-9),

BMI does address the conspiracy claim in

opposing the motion for summary judgment in the Spellman Case.

BMI

claims that the "sequence of events" described in the Scherch
Declaration (see Doc. No. 142, Exh. 10) raises material facts about
the "coincidence of taking trade secret material that did not
belong to him and within four days of resigning from employment
with [BMI], being employed by Accuray and with his co-Defendant Mr.
Hill."

(Doc. No. 146 at 6.)

vacation" when he was

In addition, Hill "pretended to be on

actually in California

interviewing for

employment with Accuray28 and was offered employment on October 18,
2007.

The e-mails and contacts between Hill and Accuray were a

"precursor to the resignation of the Defendant's [sic] herein and
ultimately their employment by Accuray within a very short period
BMI denies that Hill was "on vacation," and states that he was
conducting a job interview in California with Accuray, actions BMI
describes as "nefarious" and material.
(Doc. No. 149, 'lB.)
However,
BMI provides no evidence to support the argument that Hill did not take
vacation days for his interview travel (as opposed to being paid for
working on those days.) We also disagree that conducting a job interview
while still employed by another is "nefarious;" at most, it is an act
which falls under the category of making "arrangements to compete." See
Cornerstone Sys. v. Knichel Logistics, Nos. 06-4114 and 06-4200, 2007
U.S. App. 27B07, *7-*B (3d Cir. Nov. 30, 2007), discussing permissible
acts an employee may take prior to terminating his employment without
breaching his fiduciary duties.
28

58

of time,"

These actions create genuine issues of material fact

about the conspiracy among the Defendants.

(Id.

at 7.)

BMI fails entirely to develop its conspiracy theory based on
Scherch's Declaration and the fact that he went to work for Accuray
as an independent contractor immediately after leaving BMI.

We

need not address BMI's second argument, i.e., that Accuray and the
Individual Defendants conspired for the latter to leave BMI, taking
confidential information that was subsequently used by Accuray to
compete with BMI because, as we have concluded above, no such acts
constituting unfair competition have been established.
to

the

first

part

of

Individual

Defendants

Pittsburgh

for

the

the

claim,

conspired

purpose

i. e.,
to

competing

that

Accuray

establish
with

With regard

an

BMI,

and

the

office

in

without

some

evidence to support it, we soundly reject the argument that such an
act is evidence of malice or unlawful actions.

The record shows

that both Accuray and Best Medical provide goods and services on a
nationwide basis.

There is no evidence to show Accuray was acting

for other than professional business reasons when it decided to
open an office in Pittsburgh where,

the Court notes,

substantial and sophisticated medical presence.

there is a

Nor is there any

evidence that the Individual Defendants decided to leave BMI for
any reason other than to advance their own careers, especially when
it was obvious that after the Acquisition,

BMI' s

intent was to

reduce the number of engineering and development employees and to
59

out source much of the computer programming previously done in that

See Festa v. Jordan, CA No. 09-2240, 2011 u.s. Dist.

department.

LEXIS 80617, *17 (M. D. Pa. July 25, 2011)
acted

for

professional

reasons,

and

("a showing that a person

not

solely

to

injure

the

plaintiff, negates a finding of malice"); see also Bro-Tech Corp.,
651

F.

Supp.2d

at

419

(if

the

acts

alleged

were

done

for

"professional or business benefit," rather than intent solely to
injure the plaintiff, no showing of malice has been made.)
In the absence of evidence to support BMI's conspiracy claim,29
summary

judgment

is

granted

to

Accuray

and

the

Individual

Defendants on Count II.

v.

ANALYSIS:

THE HILL CASE

In this case,

we have a motion for summary judgment on the

question of whether BMI breached its severance agreement with Hill
by failing to pay benefits when he left the company in October
2007.

In addition,

BMI raised four counterclaims,

some of which

overlap with those discussed in the previous sections; Hill has
moved for summary judgment on those claims as well. We begin with
the issue of Hill's severance benefits.
A.

Breach of Contract by BMI

1.

Hill's claim and arguments:

As noted in Section I

above, the severance agreement between Hill and NOMOS provided that
BMI's brief in opposition again simply reiterates the allegations of
the Complaint without reference to the evidence of record.
(Doc. No. 128
at 7-9.)

29

60

certain

benefits

would

be

triggered

by

Hill's

"involuntary

termination," a situation which included, among other events, his
vol untary

resignation

change in

[his]

[his]

duties

thereto. )

position at

and
The

"wi thin

sixty
[NOMOS]

responsibilities.
severance

(60)

following

(A)

a

which materially reduce [d]
(Doc.

II

agreement

days

does

No.1,

not

and

define

Exh.

the

B

term

"materially reduce" or provide examples of what would constitute a
material reduction.
Hill alleged that after the BMI Acquisition on September 11,
2007,

he was told he would be moved from his position as Vice

President for Engineering & Development to Director of Software for
a new entity to be formed.

In addition, his staff was cut by at

least three and the remaining staff would no longer be charged with
developing

products

but

only

"defining"

them.

These

events

materially reduced his duties and responsibilities, thus entitling
him to severance benefits when he resigned on October 4, 2007, well
within the 60-day period following announcement of this change.
BMI's

refusal

to pay the benefits constituted a

breach of the

severance agreement.
According to Hill's brief in support of his motion for summary
judgment,

BMI

has

admitted

that

the

department cut his staff by at least 50%.

reorganization

of

his

(See Doc. No. 138, Exh.

13, Cernica Depo. at 122, stating that he had been told BMI "had
fired or let go of half of

[Hill's]
61

staff. ")

As evidence of a

material reduction in this area of his managerial duties after the
Acquisition,

Hill

notes

the

immediate

termination

of

three

employees in his department on September 27, 2007, and an e-mail
from his direct supervisor, Michael Ryan, to Mr. Suthanthiran, the
president of BMI,

stating that before the Acquisition, NOMOS had

planned to reduce the headcount by 15 people.

(Doc. No. 138, Exh.

6. )

wrote

On

September

30,

2007,

Mr.

Ryan

also

that

if Mr.

Suthanthiran's desire was to "form a design team nucleus and then
farm

out

much

of

the

code

writing,

etc.,

I

would

headcount to 10 people, including the manager."
Second,
President

Hill's

for

&

Development

defined duties:

(1)

development,

implementation

executing

processes

the

(Id., Exh. 7.)

job description at the time he became Vice

Engineering

and

reduce

included

four

broadly

helping to develop the company's research,

to

of

conceive,

products i

define,

(2)

defining

develop,

and

and

deliver

complex software-driven,

electromechanical medical products;

working

marketing

with

the

NOMOS

department

on

all

(3)

phases

of

product design, development, characterization, and transfer to the
manufacturing effort; and (4) attracting, retaining, and developing
department staff engineers and others, a total of 30-40 employees.
(Doc. No. 138, Exh. 2.)
personal

Hill argues the material reductions in his

responsibilities

as

a

result

of

his

President to Director were also admitted by Dr.

move

from

Vice

Cernica when he

testified that Tom Rowden, a BMI employee who had worked for Hill,
62

had told him Hill's duties had been diminished.

(Doc. No. 138 at

3-4 and Exh. 13, Cernica Depo. at 122.)

BMI's

2.
description

relied

arguments:
upon

by

responsibilities

had

Acquisition

includes

also

BMI

Hill

been

to

points
show

materially
an

out

that

his

reduced

acknowledgment

that

the

job

duties

and

following

that

he

the

knew

the

description would be "subject to modification at any time."

(Doc.

No.

BMI's

148 at 3.)

Relying on an affidavit from Ruth Bergin,

Senior Vice President and General Counsel, BMI further argues that
Hill's new duties as Director of Research 30 were not materially
different from those he had as Vice President for Engineering &
Development.

Id. at 3, see also Doc. No. 150, Exh. 9.)

A third

reason Hill was not entitled to severance benefits is that he did
not

"execute

and

deliver

Involuntary Termination,

to
a

severance benefits agreement.
and Exh. 9.)

the

Company,

general

at

release"

the

as

time

of

such

required by the

(Id. at 3, Doc. No. 150, Exh. 3 at 3

In sum, BMI argues, Hill voluntarily resigned to take

a new job with AccuraYi

such a voluntarily resignation does not

entitle him to severance benefits; and therefore, BMI, as successor
to NOMOS,

did not breach the severance agreement by refusing to

provide the bene

3.

(Doc. No. 148 at 2 5.)

ts Hill seeks.

Relevant law:

To prevail on a breach of contract

We note for the record that Hill's new title was not intended to be
Director of Research but rather Director of Software.

30

63

claim under Pennsylvania law, the plaintiff must establish:

"(1)

the existence of a contract, including its essential terms,

(2) a

breach

of

damages."

a

duty

imposed by

that

contract i

and

(3)

resultant

Williams v. Nationwide Mut. Ins. Co., 750 A.2d 881, 884

(Pa. Super. Ct. 2000)

(internal quotation omitted.)

To withstand

summary judgment on a claim for breach of contract, the non-moving
party must demonstrate the existence of a genuine issue of fact
regarding at least one of those three elements.
v. Mancuso Chems. Ltd., 469 F. Supp.2d 303, 322
4.

Discussion and conclusion:

Harry Miller Corp.
(E.D. Pa. 2007).

The evidence is clear

that the parties did in fact have a contract which both agree was
binding at the time Hill resigned his position with BMI. Hill has
quantified his damages for unpaid salary and bonus.
Exh. 15,

~

11.)

Thus, the first and third elements of a breach of

contract claim have been established.
the

( Do c. No. 138 ,

reorganization,

product

BMI has admitted that after

development

duties - was to be substantially out sourced .

one

of

Hill's

(Doc. No. 149,

major
~

28.)

BMI has also admitted that although his "title remained the same
following the acquisition,

Mr.

Hill's job responsibilities were

diminished and half of his staff were fired or let go by Best
Medical following the Best Medical acquisition of NOMOS."

(See

Doc. No. 120, ~ 22 and Doc. No. 129, ~ 22.)31

31
This is one of the instances referred to above where BMI admits a
critical statement of fact by Hill or another Defendant, yet goes on to
argue in its brief that summary judgment cannot be granted on this claim.

64

Hill's duties as Vice President for Engineering & Development
are clearly spelled out in the record; the duties he would have had
as

Director

of

Software

are

not.

As

a

vice

president,

Hill

reported to a Senior Vice President of NOMOS; his place in the BMI
management
medical

hierarchy

advisory

as

board

Director
for

the

of
new

Software
entity

and
is

member

not

Although Accuray and Hill provided evidence that

of

a

explained.

some 20 NOMOS

employees were terminated after the BMI Acquisition (Doc. No. 138,
Exhs. 8 and 9), it is unclear from that evidence how many reported
to

Hill.

However,

restructuring

of

the

his

evidence

department

shows
was

that

to

the

intent

outsource

all

of

the

product

development functions, retaining only product definition to be done
by in-house staff.
BMI argues that the affidavit from its general counsel, Ruth
Bergin,

states that after the reorganization,

not "materially reduced."

Hill's duties were

(Doc. No. 148 at 3.)

However, we note

that Ms. Bergin's affidavit does not state that Hill's duties were
not

"materially reduced,"

only that

he was

"not

demoted."

To

trigger payment of the severance benefits, the agreement requires
only a change in position which materially reduces the employee's
duties

and

position

responsibilities,

was

to

be

not

changed,

a

demotion.

i.e.,

from

It
Vice

is

clear his

President

of

Engineering & Development to Director of Software, and it appears
from the evidence that his direct supervisory and managerial duties
65

were being displaced by a position as
board.

Moreover,

Ms.

Bergin's

a member of an advisory

affidavit

is

not

supported

by

concrete evidence, e.g., a copy of the job description for Director
of Software which would allow the Court to determine if the duties,
responsibili ties,

and other aspects of his

comparable or at

least

former and proposed

positions

were

had not

been materially

reduced.

Despite BMI's argument that Hill failed to fully describe

the extent of his proposed duties and thus cannot show that they
were materially reduced (Doc. No. 149,
the

Court

that

since

BMI

would

~~

14, 28), it would seem to

have

created

the

new

job

description, BMI should have the burden of proof on this question.
Ms. Bergin's affidavit notes the "importance" Hill had to the
company

at

the

time

he

resigned

and

her

awareness

that

Mr.

Suthanthiran had "made it clear that he valued Rob Hill and did not
want

him

to

leave

NOMOS."

This

statement

is

undercut

by

contemporaneous documents from which one can readily infer that
Hill was also destined to be let go.
mail

to

Mr.

Suthanthiran,

Replacement," and stated:
however,

Mr.

In the September 30, 2007 e­

Ryan

referred

to

"Rob

Hill

or

"I know your feelings about Rob Hill;

I would keep him in place for a short period of time to

ensure an orderly transition;
necessary."

then take whatever steps you feel

(Doc. No. 138, Exh. 7.)

Finally, we reject BMI's argument that Hill was not entitled
to

severance

benefits

because

he
66

failed

to

provide

a

general

release.

Logically, Hill would have signed a release concurrently

with payment of the benefits, an event which never occurred.
BMI has failed to support with record evidence its argument
that it did not breach the severance agreement.
forward

with

evidence

that

his

Hill has come

position,

managerial

responsibilities, and most likely supervisory responsibilities were
going to be decreased as the result of the reorganization of his
department.

He has provided an affidavit establishing the amount

of his damages (Doc. No. 138, Exh. IS); BMI has failed to respond
to the affidavit in any of its pleadings, thus opening the door to

See QVC, Inc., v. MJC Am., Ltd., CA

an award in the stated amount.
No.

08-3830, 2011 U.S.

2011)

Dist. LEXIS 77289,

*19

(E.D.

Pa. July 18,

(granting summary judgment in favor of plaintiff and awarding

monetary damages established by an unrebutted affidavit.)

In the

absence of any genuine issues of material fact to refute Hill's
argument

that

he

was

entitled

to

severance

benefits,

summary

judgment is granted in favor of Hill on his breach of contract
claim and he is awarded damages in the amount of $135,000.
rclaim I - Breach of Contract

B.
1.
alleged

that

EMI's claims:
it

is

NOMOS and Hill. 32
32

In Count I of the Counterclaims, BMI

entitled

obligations contained in a

Hill

to

enforce

February 9,

Under that agreement,

the

2001,

confidentiality

agreement between

Hill was obligated to keep

Curiously, although the Hill-NOMOS Agreement contained a two-year non­
67

all

BMI

proprietary

business

information

and

trade

secrets

confidential and to return all of this information upon termination
of his employment.
obligations

by

(1)

Information and

(2)

Hill allegedly breached these confidentiality
copying

and

retaining

BMI's

Confidential

using or intending to use that Confidential

Information for his own benefit or the benefit of Accuray.
No.3,

<]I<]I

(Doc.

79-86.)

2.

Hill's arguments:

arguments as above,

Hill raises essentially the same

that is, not only has BMI failed to identify

any protectable trade secrets or confidential information, it has
failed to come forward with evidence of any damages from Hill's
purported breach.

3.

( Doc . No. 137,

Relevant law:

<]I

6.)

See Section V.A.3 for the elements of

a breach of contract claim under Pennsylvania law.

4.
contained a

Discussion and conclusion:

The Hill-NOMOS agreement

non-disclosure provision which

required Hill,

both

during his employment or any time thereafter, "not to communicate
or divulge to any person, firm or corporation, either directly or
indirectly,
[NOMOS]

all

and to hold in strict confidence for the benefit of
Confidential

[C] onfidential

Information

Information.
for

any

. [and]

purpose

or

not

to use

any

for

his

her

or

personal benefit other than in the course and within the scope of

compete provision, neither in the Hill Case Counterclaims nor in the
claims against Hill in the Accuray Case did BMI attempt to enforce this
clause.
(See Doc. No. 156, 'lI 6.)

68

Employee's employment."

(Doc. No. 156,

7.)

<j[

BMI has not come forward with any evidence that Hill shared
with

Accuray

any

of

the

files

alleged

to

be

Confidential

Information that were found on his computer(s) and storage media.
Moreover,

in the March 25,

Hill agreed to

(1)

2008,

refrain from using,

BMI Confidential Information and
his possession.

Stipulated Order

(2)

No.8),

sharing or disclosing any

return all BMI documents in

BMI has failed to show that Hill violated the

Stipulated Order in either regard at any time.
damages

(Doc.

arising

from

Hill's

possession

of

Therefore,

BMI's

any

Confidential

Information could only have occurred between October 4, 2007, when
he left BMI and March 25, 2008 or the date thereafter on which he
signed the Stipulated Order.

BMI has known about some 17,000 files

allegedly on Hill's computer and storage media since early 2008,
but has not identified one example of Confidential Information that
was communicated to any other person or entity or used for Hill's
own benefit or the benefit of anyone else.

Summary judgment is

therefore granted in Hill's favor on Counterclaim I.
C.

Counterclaim III - Violation of PUTSA
1.

BMI,

Hill

BMI's

claims:

BMI alleges that prior to leaving

"copied and retained Best Medical's Confidential and

proprietary business information and trade secrets" which he used
or will use for his own benefit or that of Accuray in violation of
the PUTSA.

(Doc. No.3,

<j[<j[

95-106.)
69

Hill's arguments:

2.

Hill

argues

simply that

this

claim must fail because BMI has failed to come forward with any
evidence that the Confidential Information he took with him on his
computer when he went to Accuray was ever shared with Accuray, much
less used by his new employer.
Alleged Trade Secrets -

Moreover, as discussed above, the

the only information which could be the

basis of a PUTSA claim -

have been shown not to be trade secret

material.

~

(Doc. No. 137,

5.)

3.

Relevant law:

4.

Discussion

opposition

to

Hill's

See Section IV.A.3 above.

and

motion

conclusion:

for

surrunary

BMI's

judgment

brief

in

discusses

at

length the issue of PUTSA pre-emption as part of its argument that
genuine issues of material fact exist as to Hill's violation of the
PUTSA (Doc. No. 148 at 5-10), but fails to point to the issues and
facts

which

counterclaim.

would

preclude

granting

surrunary

judgment

on

this

In the conclusion of the brief, BMI reiterates its

argument that the source code Hill took with him to Accuray was
treatment

planning

system

("TPS")

source

code

and

"was

hard

deliverable source code that Accuray expected him to produce."
( Do c .

14 8 at 1 7 . )

BMI also repeats

its argument,

discussed at

length in the introduction to Section IV above, that "the court has
prohibi ted" it from examining Accuray TPS source code.
The

evidence

shows

that

the

two

Alleged

Trade

(Id. )
Secrets

identified by BMI came from computers or storage media retained by
70

Hill.

(Doc.

No.

121,

Bryant Report,

Exhs.

2-A and 2-B.)

This

could potentially support the claim that Hill had violated the
PUTSA

by

misappropriating

BMI's

trade

secrets.

However,

as

discussed in Section IV.A.4 above, BMI has failed to establish that
the source code found in Hill's possession did,

in fact,

rise to

the level of trade secrets.
Finally,

regarding the claim that Accuray expected Hill to

provide TPS source code, i.e., "hard deliverables," as a quid pro
quo for his new employment, this argument is apparently based on an

exchange of e-mails among Accuray employees just after Hill had
accepted the employment offer from the company on October 24, 2007.
Theresa Dadone, whose title appears to be senior vice president for
human resources, wrote:
Congratulations. Now, may I preach for a moment, PLEASE
be sure he has very clear objectives not only for his
specific job but for his role as well. What are not just
the hard deliverables you want from him but the
competencies he needs to demonstrate and the behaviours
he needs to exhibit.
Paul and I are happy to partner
with you to put that into a "job profile" form you can
hand him when he walks in the door, along with his first
six months objectives (tied clearly to revenue generation
or gross margin or net income, etc.)
(Doc. No. 150, Exh. 6, emphasis added by the Court.)
The term "hard deliverables" is business jargon for specific
quantifiable

goals

to

be accomplished

in

a

given

timeframe

as

opposed, e.g., to skills acquired.

The idea that the phrase refers

to purloined source code is not

supported anywhere else in the

71

record as far as the Court can determine.

Dr. Cernica was asked

about the phrase in his deposition and stated that "Accuray had
asked from Mr. Hill for hard deliverables on top of his job duties .
. in an e-mail communication."
Depo.

at

186.)

This

is

(Doc.

No.

138,

clearly an erroneous

Exh.

0,

Cernica

conclusion if

Dr.

Cernica was relying on the e-mail from Ms. Dadone because Hill was
not

listed among the

recipients

of that mes sage.

Dr.

Cernica

understood the phrase to refer to source code, but admitted he had
never used the term "hard deliverables" before.

However, he also

stated, as the Rule 30(b) (6) representative, that this speculation
reflected BMI's position.

Id. at 186-187.) Again, such speculation

does not establish a genuine dispute of material fact.

Summary

judgment is therefore entered in favor of Hill on the PUTSA claim.
D.

Counterclaim IV - Conversion

BMI's claims: Again,

1.

had

access

to

BMI alleges that during his

employment,

Hill

Best

Medical's

Confidential

Information,

including but not limited to source code.

Prior to

leaving BMI, Hill "copied and retained Best Medical's confidential
and proprietary business information and trade secrets
authorization.

2.

(Doc. No.3,

<J[<J[

Discussion and conclusion:

138 at 16-17),

without

109-116.)
The relevant law, Hill's

arguments in opposition to this claim (see Doc. No. 137,
No.

ll

<J[

8, Doc.

and the analysis are essentially the same as

those in Section IV.B above.

In short, despite its arguments that
72

Hill

illegally

transferred

BMI's

source

code

or

any

other

confidential or proprietary business information to Accuray,

BMI

has failed to identify even one example of such a transfer.

BMI

does point to the fact that in an e-mail dated October 4, 2007, an
Accuray employee reminded Hill that "TPS is a big component of our
system.

"33

(Doc. No. 150, Exh. 6.)

BMI argues that the Treatment

Planning System is a major component of its CORVUS cancer treatment
system and that the "illegal transfer of TPS source code from Best
Medical to Accuray via Mr. Hill and others is the very subject of
this action."

(Doc. No.

148 at 13.) This argument would be more

compelling if a search of reported opinions did not show that the
phrase "treatment planning system" or "TPS" is commonly used in
connection with radiotherapy and applied to equipment manufactured
by companies other than BMI/NOMOS or Accuray.

See, e.g., Johnston

v. Multidata Sys.

605

Int'l Corp.,

523 F.3d 602,

(5 th Cir.

2008)

(referring to a device designed and manufactured by Theratronics
International Ltd., a Canadian corporation); GE v. County of Cook,
CA No. 00-6587, 2001 U.S. Dist. LEXIS 4993, *53 (N.D. Ill. Apr. 4,
2001)

(equipment manufactured by Adac); and Chandler v. Multidata

An equally valid interpretation of this statement, based on context,
is that TPS was a reference to the Accuray division Hill would be
heading.
In the offer of appointment letter, his title is identified as
Senior Director, Treatment Planning Systems. (Doc. No. 150, Exh. 8.) The
e-mail cited by BMI states the writer's belief that "TPS is a big
component" of the Accuray system, as "reflected in the organization
structure so this position would be reporting to [senior management] and
not to others."
Id.
Exh. 6.)
33

73

Sys. Int'l Corp., 163 S.W. 537, 542 (Mo. Ct. App. 2005)

(computer­

operated treatment system manufactured by Multidata.)
For the reasons set forth in Section IV.B granting summary
judgment

in

favor

of Accuray

on

the

conversion

claim,

summary

judgment is also granted in favor of Hill on this counterclaim.
E.

Counterclaim II - Breach of Fiduciary Duty

1.

EMI's claims:

According to BMI, Hill breached his

fiduciary duty of loyalty, i.e., his duty to act in interest of BMI
wi th

respect

Specifically,

to

all

this

matters

duty

related

obligated

Hill

to

his

employment.

to

keep

all

BMI's

confidential,

proprietary business information and trade secrets

confidential.

Copying and retaining BMI's Confidential Information

was a breach of that duty.
2.

(Doc. No.3, ':l[':l[ 87-94.)

Hill's arguments:

Hill offers three reasons why

summary judgment should be granted in his favor on this claim:
has

failed

to

identify

any

protectable

trade

BMI

secrets

or

confidential or proprietary information; the claim is pre-empted by
the PUTSA to the extent it is based on the Alleged Trade Secrets;
and because the tort claim arises from a contractual obligation to
maintain confidentiality of all BMI Confidential Information, it is
barred by the gist of the action doctrine.

(Doc.

No.

137,

':l[

7;

Doc. No. 138 at 13-15.)

3.

Relevant law:

"An agent has a fiduciary duty to act

loyally for the principal's benefit in all matters connected with
74

the agency relationship."

Frontier Constr. Co. v. Mazzella, CA No.

09-794, 2009 U.S. Oist. LEXIS 106042, *12 (W.O. Pa. Nov. 13, 2009),
citing Restatement

cases,

(Third)

of Agency,

§

8.01

(2006).

In most

an alleged breach of the duty of loyalty occurs when an

employee,

while

still

employed

by

his

first

employer,

"makes

improper use of

[that]

employer's trade secrets or confidential

information, usurps a business opportunity from the employer, or,
in preparing to work for a rival business, solicits customers for
such rival business." Frontier Constr.

Co.,

id.

at * 12,

quoting

Bro-Tech Corp., 651 F. Supp.2d at 414.
4.

Discussion and conclusion:

It is clear from the

above statement of the law regarding an employee's fiduciary duty
to his employer that Hill, as an employee of NOMOS/BMI, would be
subject to such obligations.
allegedly

copying,

Information.

However, BMI's claim rests solely on

retaining,

and

using

BMI's

Confidential

As has been noted before, this claim, to the extent

it applies to the Alleged Trade Secrets, has been pre-empted by the
PUTSA.

In all other aspects of the claim, we conclude it is barred

by the gist of the action doctrine.
This Court has previously summarized the gist of the action
doctrine in Partners Coffee Co., LLC v. Oceana Servs. & Prods. Co.,
CA No. 09-236, 2009 U.S. Oist. LEXIS 113209, *7-*11 (W.O. Pa. Dec.
3,

34

2009).

Briefly stated,

the doctrine is a common law theory 34

The Pennsylvania Supreme Court has not expressly adopted the gist of

75

"designed to maintain the conceptual distinction between breach of
contract claims and tort claims" by precluding "plaintiffs from
recasting ordinary breach of contract claims into tort claims."
eToll
2002)

Inc. v. Elias Savion Adver.

811 A.2d 10, 14 (Pa. Super. Ct.

(internal citation omitted); see also Werwinski v. Ford Motor

Co., 286 F.3d 661, 680, n.8

(3d Cir. 2002). The doctrine bars tort

claims:
(1) arising solely from a contract between the parties;
(2) where the duties allegedly breached were created
and grounded in the contract itself;
(3) where the liability stems from a contract; or
(4) where the tort claim essentially duplicates a
breach of contract claim or the success of which is
wholly dependent on the terms of a contract.
Hart v. Arnold, 884 A.2d 316, 340 (Pa. Super. Ct. 2005)

(citations

omitted) .
To be construed as a tort rather than breach of a contract,
the [tortious] wrong ascribed to the defendant must be
the gist of the action with the contract being
collateral.
.The important difference between
contract and tort actions is that the latter 1
from the
breach of duties imposed as a matter of social policy
while the former lie for the breach of duties imposed by
mutual consensus.
Bohler-Uddeholm America, Inc. v. Ellwood Group, Inc., 247 F.3d 79,

the action doctrine.
However, both the United States Court of Appeals
for the Third Circuit and the Pennsylvania Superior Court have predicted
it would do so. See Williams v. Hilton Group PLC, No. 03-2590, 2004 U.S.
App. LEXIS 4980, *3 (3d Cir. Mar. 17, 2004), and eToll, 811 A.2d at 14;
see also Woods v. ERA Med LLC, CA No. 08-2495, 2009 U.S. Oist. LEXIS
3965, *24, n.11 (E.O. Pa. Jan. 21, 2009), citing other cases.

76

103-104

(3d Cir.

2001),

quoting Redevelopment Auth.

of Cambria

County v. International Ins. Co., 685 A.2d 581, 590 (Pa. Super. Ct.
1996)

(en bane).

intertwined
contract,

with

Succinctly stated, "if the duties in question are
contractual

Oct.

CA No.
30,

the

claim

sounds

but if the duties are collateral to the contract,

claim sounds in tort."
Inc.,

obligations,

06-3959,

2006);

in
the

Sunburst Paper, LLC v. Keating Fibre Int'l,
2006 U.S.

eToll,

Dist.

811 A.2d at

applies is a question of law.

LEXIS 78890,
14.

Whether

*7
the

(E.D.

Pa.

doctrine

Knit With v. Knitting Fever, Inc.,

CA No. 08 4775, 2009 U.S. Dist. LEXIS 98217, *13 (E.D. Pa. Oct. 20,
2009) .
Although styled as a breach of the duty of loyalty, the only
subject

BMI

identifies

in

its

Complaint

is

breach

of

the

confidentiality provisions of the Hill-NOMOS employment agreement.
That is,

although other fiduciary duties could be inferred from

Hill's position as an officer of NOMOS,
breaches of such duties.

BMI fails to allege any

Therefore, this claim is barred by the

gist of the action doctrine.

See Knit With, 2009 U.S. Dist. LEXIS

98217 at *11 (the doctrine forecloses pursuit of a tort action for
mere breach of contractual duties if there is no separate event
giving rise to the tort.)

Summary judgment is entered in favor of

Hill on Counterclaim II.

77

VI.

ANALYSIS:

THE SPELLMAN CASE

35

Bittman, Scherch, and Spellman argue that they are entitled to
summary judgment in their favor on all remaining confidentiality
claims because BMI failed to identify any protectable trade secrets
and

failed

to

establish

Confidential Information.

that

Defendants

misused

(Doc. No. 140 at 8-12.)

any

of

BMI' s

With regard to

the non-compete clauses of their agreements with NOMOS/BMI,

they

should be granted summary judgment because there is no evidence BMI
and Accuray are competitors, that they worked on competing products
and services while

at Accuray,

or that

they have

violated the

November 4, 2008 Order of Court defining the permissible scope of
their work at Accuray.
A.

(Id. at 13-15.)

Background
We

begin

our

analysis

by

providing

additional

facts

pertinent to the claims against these Defendants.
1.

John

David Scherch:

According to the Complaint,

Scherch was responsible for strategic planning and hands-on product
In his position,

development at NOMOS.
code

and

data

files

regarding

he had access to source

NOMOS's

products

and

services,

product development documents and information, sales information,
marketing

projections,

initiatives.

and

product

(Spellman Case, Complaint,

planning
~~

strategies

and

26 and 41.) On May 30,

35
In this Section, the word "Defendants" refers to Bittman, Scherch,
and Spellman collectively.

78

1996, in consideration for certain stock options, Scherch and NOMOS
entered into a Key Employee Non-Disclosure,
Competition

Agreement

("the

Inventions, and Non-

Scherch-NOMOS

Agreement.")

The

agreement contained the following provision:
14.
I agree that while I am employed by the Company
[i. e. , NOMOS] and for a period of two years after
termination or cessation of such employment for any
reason whatsoever, I shall not, without the Company's
prior written consent, directly or indirectly, as a
principal, employee, consultant, partner or stockholder
of, or in any other capacity with any business enterprise
. . . (a) compete in any way whatsoever with NOMOS in the
design, manufacture, or sale of any device, computer
hardware, software, accessories or other products, used
in conformal radiation therapy, that are in competition
with similar NOMOS products disclosed to me during the
term of my employment with NOMOS ("Competing Products and
Services") ,
(b) conduct a business that produces or
supplies the Competing Products and Services,.
(cl
develop Competing Products and Services, [or] (d) become
employed by any entity which manufactures, sells or
provides the Competing Products and Services.
~

(Spellman Case, Complaint,

30, and Exh. B.)

The Scherch-NOMOS Agreement also contained provisions that
required him to notify NOMOS of any subsequent employment and made
the

agreement

connection

assignable

with

a

to

merger,

and

enforceable

consolidation,

by a

or

sale

substantially all of NOMOS's business or assets.
Complaint,
Soon

~~

31-32, and Exh. B,

after

the

~~

Acquisition,

successor
of

all

in
or

(Spellman Case,

17 and 21.)
on

October

2,

2007,

in

consideration for his new employment with BMI, Scherch entered into
an

Employee's

Confidentiality

Agreement

as

to

Proprietary

(the "Scherch-BMI Agreement.")
79

Information

and

The non -compete

provision in that agreement stated:
5.
Employee acknowledges that it would be impossible
for him or her to avoid disclosing, revealing or using
Proprietary Information in violation of Paragraph 4
hereof in the event that he or she went into competition
with Company [i.e., Best Medical], or worked for, or had
any ownership interest in, any of Company's competitors.
Accordingly, Employee shall not, during the term of his
or her employment with Company and for three (3) years
after termination of such employment, (a) directly or
indirectly go into competition with Company, or (b)
accept any job, employment or consulting work directly or
indirectly with or for any of Company's present or future
competitors.
(Spellman Case, Complaint, ~ 35, and Exh. C.)36
As he had in his
advise

BMI

of

his

agreement with NOMOS,

new

employment

and

to

Scherch agreed to

return

all

of

BMI's

Confidential Information upon request or upon termination of his
employment.
and 6.)

(Spellman Case, Complaint,

~~

38-39, and Exh. C,

~~

3

Finally, Scherch agreed that BMI would suffer "immediate

and irreparable harm" if he breached any of his obligations in the
agreement.

( I d.,

~

40,

and

Exh .

C,

~

7.)

One

significant

difference between the Scherch-NOMOS Agreement and the Scherch-BMI
Agreement was that the latter allowed Scherch to work "in an area
or in a position with a competitor that is entirely unrelated to or
not competitive with Company."

(Exh. C,

~

5.)

Scherch left his employment with BMI on December 7,

2007.

The omitted provisions (c) through (f) relate to inducing BMI employees
to leave BMI, interfering with the relationship of BMI and any of its
employees, employing former BMI employees, or inducing BMI customers,
suppliers, etc., to cease doing business with BMI.
Defendants are not
alleged to have taken any actions breaching those provisions.

36

80

After working as an independent contractor for Accuray for a short
period of time, he was employed by the company in June 2008 as a
senior software engineer.

He concedes he did not advise 8MI about

his

did

new

employment

and

not

return

any

confidential

or

proprietary materials when he left 8MI.

2.

David Spellman:

As a software engineer for NOMOS

and as a project manager for 8MI after the Acquisition, Spellman
was responsible for product development and for interacting with
existing and potential customers at trade shows. In his positions,
Spellman

had

access

to

source

code

and

data

files

regarding

NOMOS/8MI products and services, product development documents and
information,

sales

information,

and marketing projections.

February 26,

2001,

Spellman entered into a

Con

On

dentiality and

Proprietary Rights Agreement (the "Spellman-NOMOS Agreement") which
contained exactly the same non-compete provision as that in the
(Spellman Case, Complaint,

Scherch-NOMOS Agreement.
D.)

The

post-employment

successor-in-interest

notification

provisions

were

and
also

~

48, and Exh.

enforceability by a
identical

to

those

Scherch had agreed to.
On September 26,

2007,

Spellman entered into an agreement

similar to that between Scherch and 8MI, i.e., containing the same
three-year non-compete provision, requirements that he return all
BMI Confidential Information upon terminating his employment and
notify 8MI of his new employer, and language regarding "immediate
81

and irreparable harm" if he were to breach any of his obligations
thereunder.

(Spellman

Case,

Complaint,

':1[':1[

57-59

and

Exh.

E.)

Spellman was also allowed under his agreement with BMI to work for
a competitor in an area or position unrelated to BMI's products and
services.

(Exh. E, ':1[5.)

Spellman resigned on January 4,

2008,

and a few weeks later

entered into a written Consulting and Confidentiality Agreement
with BMI.

(Spellman Case, Complaint, ':1[':1[ 60-61, and Exh. F.)

That

agreement did not contain a non-compete provision, but did have a
fi ve-year

prohibition

against

divulging any BMI

information he

acquired during the course of his consulting agreement.
6.)

(Exh. F,

':J[

In April 2008, Spellman began working for Accuray.

3.

Marcus Bittman:

Bittman began working with NOMOS in

March 2001 as an associate software engineer, then moved to various
other

positions

including

engineering

manager

and

marketing

manager, where he was responsible for interacting with existing and
potential NOMOS customers.

In those positions, he also had access

to BMI Confidential Information, e.g., source code and data files
regarding the company's products and services, product development
documents

and

information,

sales

projections, and marketing strategies.

information,
On May 30,

marketing

2001,

Bittman

and NOMOS entered into a Confidentiality and Proprietary Rights
Agreement (the "Bittman-NOMOS Agreement") which contained the same
non-compete,

notification,

enforceability and "irreparable harm"
82

provisions as in the Scherch and Spellman agreements with NOMOS.
(Spellman Case, Complaint, 11 65-72, 74-75, and Exh. G.)
Bittman resigned his employment with Best Medical on October
4,

2007,

without having signed an agreement with BMI after the

Acquisition.

He started working

for Accuray at

its

Pittsburgh

office in February 2008.

4.

General:

other employees,

While working for BMI,

Defendants,

like

regularly performed work on their own personal

computers both at the office and at home.

As noted above,

Cernica testified that it was common for sta

to do this and NOMOS

management never objected to the practice.

All three Defendants

Dr.

have stated in sworn declarations that when they left BMI, no one
requested them to return documents they might have had on their
computers

or

reminded

them

of

their

obligation

to

provide

information about their future employment or the non-compete and
confidentiality provisions of their agreements with NOMOS and/or
BMI.

(Doc. No. 142, Exhs.

10,

11 and 12.)

All three Defendants

also assert that since they left BMI, they have not used or shared
any BMI materials with other persons or entities.

Id.)37

37
These points are all disputed by BMI (compare Doc. No. 142, 'IT'lT 45-47,
with Doc. No. 147, 'IT'lT 45 47), but BMI fails to identify record evidence
to support its denial, contrary to Local Rule 56(e) (1) (b) and (B) (1),
which requires citation "to a particular pleading, deposition, answer to
interrogatory, admission on file or other. part of the record supporting
the party's statement, acceptance or denial of the material fact." See
Laymon v. Bombardier Trans. (Holdings) USA, Inc., eA No. 05-169, 2009
U.S. LEXIS 24403, *2-*3 (W.O. Pa. Mar. 23, 2009), noting that the penalty
for failing to comply with Local Rule 56 (e) (1) (b) is that the facts

83

As noted above,

BMI sued Bittman,

Scherch,

and Spellman on

October 6, 2008, when it learned, purportedly through discovery in
the Hill Case, that the three former employees had begun working
for Accuray some four to eight months earlier in violation of the
non-compete clauses in their employment agreements.
2008,

the

Defendants

parties
from

agreed
using

to

or

a

On November 4,

Stipulated Order which enj oined

sharing

any

BMI

"confidential

proprietary information and trade secrets."38 However,

and

Defendants

were permitted to continue their employment with Accuray as long as
they were not working
on any existing products or products in development at
Accuray, Inc., or any other company or employer, which
are equivalent in form, fit and function to any products
which were in existence or in development at Best Medical
and/or [NOMOS] while Defendants were employed at Best
Medical and/or NOMOS, and on which Defendants worked, had
access, and/or were involved with.
(Spellman Case, Doc. No. 15,

~

4.)

The term "equivalent in form, fit and function" was described
in

terms

of

speci

c

software,

serial

tomotherapy

delivery,

ultrasound imaging delivery, and optical tracking systems. 39

Id.)

stated in the opposing party's statement of material facts are "deemed
admitted unless specifically denied or otherwise controverted by a
separate concise statement of the opposing party."
The definition of "confidential and proprietary information and trade
secrets" was identical to that in the Stipulated Order to which Hill
agreed on March 25, 2008, quoted at note 8 above.
(Spellman Case, Doc.
No. 15, 'l1 3.)
38

39 The products on which Defendants could not work were explicitly spelled
out, i. e., "( i) software systems used in the generation of intensity
modulated radiation therapy ("IMRT") treatment plans for deli very by
84

The November 4, 2008 Stipulated Order also required Defendants to
turn over to BMI's computer forensics examiner their computers and
electronic storage media for the same type of review, cataloguing,
and deletion as Hill's equipment had undergone.
We

turn

now

to

each

of

the

claims

(Id.,

raised

by

<JI<JI

BMI

5-11.)

in

the

Spellman Case, beginning with the PUTSA claim.
B.

Count VII - Violation of PUTSA
BMI

alleged

that

during

their

employment,

Bittman,

Scherch, and Spellman had access to the company's "confidential and
proprietary business information and trade secrets, including but
not limited to source code, data files and marketing materials."
(Spellman

Case,

"thousands

of

Complaint,
files"

in

<JI

145.)

Hill's

Due

to

possession,

the

discovery

BMI

alleged

of

that

Defendants could also possess its trade secrets which they used or
might use in the future for their own benefit or that of Accuray.
Id.

<JI<JI

154-155.)

We need not dwell on this issue more than a sentence or two.
As noted above, BMI stipulated that there were only two remaining

gantry based medical linear accelerators using a multi-leaf collimator
("MLC") to collimate the radiation fields (i.e., compete with the Best
Medical CORVUS treatment planning system); (ii) systems that deliver
serial tomotherapy on gantry based medical linear accelerators (i.e.,
compete with the Best Medical nomosSTAR product) i (iii) systems that
provide ultrasound imaging to aid in treatment guidance/ locali zation
(i.e., compete with the Best Medical BAT product); and (iv) systems that
employ optical tracking systems with passive markers to aid in patient
localization during treatment delivery (i.e., compete with the Best
Medical nTrak product.)"
(Spellman Case, Doc. No. 15, , 4.)

85

trade secrets at issue in this case.
Alleged

Trade

Secrets

storage media.
evidence

to

were

The evidence shows that both

recovered

from

(Doc. No. 122, Exhs. A and B.)

contradict

this

conclusion

in

summary judgment in favor of Defendants.
number of cases
motion

to

Hill's

discussing

dismiss,40

BMI

only

its

brief

Rather,

that

or

BMI has offered no

PUTSA violations

argues

computer

at
"the

opposing

relying on a

the

stage of a

question

still

present for the court to decide as the trier of fact is whether or
not the confidential material possessed by Defendants constituted a
trade secret under PUTSA."

(Doc. No. 146 at 3-5, 8.)

As discussed

at length above in Section IV.A, BMI has failed to establish that
either of the Alleged Trade Secrets did,

in fact,

trade

the

secret

as

that

term is

defined

in

constitute a

PUTSA or

that

it

suffered any damages as a result of the purported misappropriation.
Therefore, summary judgment on Count VII must be entered in favor
of Bittman, Scherch, and Spellman.

40
BMI cites to Roger Dubois N. Am., Inc., v. Thomas, CA No. 05-2566,
2006 U.S. Dist. LEXIS 65674, *10 (M.D. Pa. Sept. 14, 2006)i Stone Castle
Fin., Inc., v. Friedman, Billings, Ramsey & Co., Inc., 191 F. Supp.2d
652, 659 (E.D. Va. 2002) (applying Virginia version of the Uniform Trade
Secrets Act); Cenveo Corp., supra, 2007 U.S. Dist. LEXIS 9966 at *8-*11;
Ideal Aerosmith, supra, 2008 U.S. Dist. LEXIS 33463 at *17-*18 (motion
for judgment on the pleadings); Weiss v. Fiber Optic Designs, Inc., CA
No.06-5258, 2007 U.S. Dist. LEXIS 83585, *3 (E.D. Pa. Nov. 9, 2007);
Firstrust Bank v. DiDio, No. 200, 2005 Phila. Ct. Com. Pl. LEXIS 376
(Pa. Com. Pl. July 29, 2005); and EXL Labs., supra, 2011 U.S. Dist. LEXIS
25295 at *18-*20. The only case cited by BMI which pertained to a motion
for summary judgment was Bro-Tech Corp., 651 F. Supp.2d at 411, in which
the court denied the defendants' motion for summary judgment because
there were genuine issues of material fact as to whether the information
they took qualified as trade secret information.

86

C.

Breach of Confidentiality Provisions in
Contracts with BMI and NOMOS - Counts I through VI
In the Spellman complaint, BMI organized its allegations

according to the agreements Defendants signed with either itself or
with NOMOS.

The allegations fall into two distinct groups - breach

of confidentiality provisions and breach of non-compete provisions.
Because there is almost complete duplication of the allegations
against each Defendant, we have addressed BMI's claims according to
the type of breach to simplify the discussion and begin with the
allegations regarding the confidentiality provisions.

1.
Spellman

BMI's claims:

violated

confidentiality

agreements with BMI.
respectively.)
provisions

of

January 25, 2008.

clauses

in

their

employment

(Spellman Case, Complaint, Counts I and III,

Second,
the

BMI first alleges that Scherch and

Spellman

consulting
Id.

breached

agreement

Count V.)

the

he

confidentiality

signed

with

BMI

on

Third, Defendants breached the

confidentiality provisions of their agreements with NOMOS which
BMI,

as a successor-in-interest,

is entitled to enforce.

(Id. ,

Counts II, IV, and VI.)

2.

Defendants' arguments and relevant law:

As noted

above, to prevail on a breach of contract claim under Pennsylvania
law,

the plaintiff must establish the existence of a

breach of a duty imposed by that contract, and
ionwide Mut. Ins. Co.

supra.
87

damages.

contract,
Williams

Defendants argue that BMI has

failed to satisfy these elements because there is no evidence that
they divulged BMI

Confidential

including Accuray.

3.

Information to any third party,

(Doc. No. 140 at 8-11.)

Discussion and conclusion:

As indicated above, BMI

has conceded that neither of the Alleged Trade Secrets was found on
the computers or storage media of any Defendant.

Now, however, it

argues that although no trade secret materials were found when the
computers were searched by its forensic computer expert, there is
no evidence they did not contain trade secret information when
Defendants left BMI.

(Doc. No. 146 at 5.)

While this may be true,

there is no evidence to support this hypothesis.

At this stage,

BMI's allegation in its complaint that Defendants misappropriated
its trade secrets does not create an issue of material disputed
fact.

As the Third Circuit Court of Appeals has succinctly stated,

"[S)ummary judgment is essentially 'put up or shut up' time for the
non-moving party: the non-moving party must rebut the motion with
facts in the record and cannot rest solely on assertions made in
the pleadings, legal memoranda, or oral argument."

Berckeley Inv.

Group, Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006)
J.)

(Fisher,

BMI's speculation that there might have been trade secrets on

Defendants'

computers at

some point

in

time does

not

create a

genuine dispute sufficient to withstand summary judgment.
As for other BMI documents and information,
that in its May 27,

2011,

Defendants note

amended discovery responses
88

(Doc.

No.

142, Exh. 9 at 3-4), BMI identified for the first time 33 allegedly
misappropriated computer files which, while not trade secrets, were
purported to contain proprietary or confidential information ("the
Alleged Confidential Materials.")

However, BMI failed to explain

why or how these documents were in fact confidential,

stating in

its response only that each item was designated by its originator
as "confidential." (Id. at 4.)
According to Defendants'

declarations,

when copies of the

documents themselves were actually produced by BMI on July 21, 2011
(one day before Defendants' motion for summary judgment was to be
filed),

they determined that of the 33 documents, none were found

on Spellman's computers or storage devices.

Seven documents were

found on Scherch's devices, but, according to the records prepared
by

BMI's

own

forensic

computer

specialist,

none

of

them

were

accessed or modified after he left BMI in December 2007 and,

in

fact were last accessed some nine months prior to the date on which
he resigned from BMI.
found

on

resigned

Bittman's
from

BMI.

Of the 26 Alleged Confidential Materials

computers,

only

According

to

two
a

were

accessed

declaration

after

he

submitted

by

Bittman, his original computer "crashed" in June 2008 and he copied
all

the documents

result,

on his

hard drive

to

a

new computer.

As

a

the metadata for those two documents show that they were

"accessed" as of the date the transfer was made.
11-12 and Doc. No. 142, Exh. 12,

~

89

32.)

(Doc. No. 140 at

BMI acknowledges these statements in its brief in opposition
to Defendants' motion for summary judgment (Doc. No. 146 at 7-8),
but fails to establish damages

from Defendants simply retaining

these Alleged Confidential Materials.

Allowing a claim for breach

of the confidentiality provisions of a contract to proceed solely
on the fact that the author designated a particular document as
confidential would theoretically allow a

claim to arise

if the

defendant copied, for example, the Christmas shopping list of a co­
employer,

that is,

Without

evidence

confidentiali ty,

a document that had no economic value to BMI.
to

support

and without a

this

bare

allegation

of

hint to the Court of what these

Alleged Confidential Materials might be, to the extent the breach
of contract claim rests on these documents or files,

that claim

must fail.
We

agree

that,

technically,

Defendants

breached

the

confidentiality provisions of their agreements with BMI and NOMOS
by failing to return documents and computer files when they left
BMI.

However,

Defendants

BMI has not come forward with any evidence that

shared

that

information

with

Accuray, nor has BMI shown that Defendants'
information

prior

to

their

departure

any

entity,

including

failure to return the

resulted

in

any

damages.

Summary judgment is therefore granted to Defendants on the breach
of the confidentiality provisions of their contracts with BMI and
NOMOS.
90

D.

Breach of Non-Competition Provisions in Contracts
with BMI and NOMOS - Counts I through IV and VI

1.

BMI's claims:

compete provisions

BMI alleged that pursuant to the non­

in their employment

agreements,

Scherch and

Spellman were prohibited from working for a competitor of BMI for
three years following termination of their employment.
Case,

Complaint,

Counts

I

and I I I ,

respectively.)

(Spellman
Scherch and

Spellman also breached a provision of those contracts requiring
them to inform BMI in writing of their new employment.

Finally, as

successor-in-interest to NOMOS, BMI is entitled, by virtue of the
Purchase Agreement, to enforce the two-year non-compete clauses in
those agreements.
2.

(Id., Counts II,

Defendants'

IV, and VI.)

argumen ts:

Defendants

contend

that

BMI's arguments regarding breach of the non-compete provisions are
fatally flawed because BMI has, in effect, conceded that the work
they have done for Accuray does not constitute "competition" with
BMI.

In addition, BMI has once again failed to come forward with

any evidence of harm, e.g., lost sales, as a result of the alleged
breaches of the non-compete provisions.

3.

Relevant law:

(Doc. No. 140 at 13-15.)

Restrictive covenants prohibiting an

employee from competing with his former employer are recognized
under Pennsylvania law.
F.3d 412, 424

Zambelli Fireworks Mfg. Co. v. Wood, 592

(3d Cir. 2010.)

as a restraint on trade,

While such covenants are disfavored

they are enforceable to the extent that
91

they

are

"incident

to

an

employment

relationship

between

the

parties; the restrictions imposed by the covenant are reasonably
necessary for the protection of the employer; and the restrictions
imposed are reasonably limited in duration and geographic extent."
Victaulic Co. v. Tiernan, 499 F.3d 227, 235 (3d Cir. 2007); see also
~H~e~s~~~~~~r~d~&~C~o~.

808 A.2d 912,

917

(Pa.

2002)

(non-compete

and other restrictive covenants "are not favored in Pennsylvania
and

have

been

historically

viewed

as

a

trade

restraint

prevents a former employee from earning a living.")

that

"Generally,

American courts insist that an employer may not enforce a post­
employment restriction on a
competi tion

per

sei

the

former employee simply to eliminate

employer

business interest to be protected."

4.

must
Hess,

Discussion and conclusion:

establi sh

a

legitimate

808 A.2d at 918.
Defendants all assert

under penalty of perjury that after they left employment with BMI ­
even before they agreed to the Stipulated Order of November 4, 2008
--

they did not

work on any existing products

or products

in

development with Accuray or any other employer that are equivalent
in form, fit and function to any products which were in existence
or in development at BMI or NOMOS while they were employed there.
BMI

responds

only

that

other

than

these

"self-serving

declarations," it does not have sufficient knowledge to admit or
deny these statements.

(Compare Doc. No. 142,

10 12, with Doc. No. 147,

~~

66-71.)
92

~~

66-71 and Exhs.

As noted above, the November 4, 2008 Stipulated Order agreed
to by BMI allowed Defendants to continue working at Accuray as long
as they did not work on a precisely described set of products.
(See note 39, supra.)

The specificity with which that restriction

was set out would seem to imply that the four products described in
the Stipulated Order were and are the only areas in which Accuray
and BMI saw themselves as competitors.

Defendants have declared

that they have not worked on these products at

any time,

even

before the Stipulated Order was entered, and BMI has presented no
evidence which would cast doubt on those sworn statements.
Defendants

further

assert

that

BMI

and

Accuray

are

not

competing companies because each services a different segment of
the health care industry, sells different types of equipment under
different pricing plans, and the equipment each provides requires
different types of support,
(Doc.

No.

provides

142,

facilities,

10-12.)

citation to

no

Exhs.

the

BMI

and operating software.

denies

evidence of

this

statement

but

record supporting its

argument that they are in fact competitors, contrary to Local Rule
56 (C) (1) (b) .

It would appear to be a simple matter for BMI to

identify products and services in which the two companies compete,
assuming such areas exist, since the market for such specialized
products is most
apparently

knew a

likely quite small.
great

deal

about

Dr.

Cernica,

for example,

how the Accuray Cyberknife

system worked (see Doc. No. 121, Exh. 2, Cernica Depo. at 237, 246,
93

278-279, 287-288}, and would seem to be capable of giving examples
of competing BMI products.
As we have repeatedly noted, a party opposing summary judgment
"cannot rest on mere pleadings or allegations; rather

must point

to actual evidence in the record on which a jury could decide an
issue of fact its way."
2007).

El v. SEPTA, 479 F.3d 232, 238 (3d Cir.

BMI did not identify any damages it incurred between the

time Defendants left its employ through the date of the Stipulated
Order.

BMI agreed in November 2008 to allow Defendants to continue

to work for Accuray in any capacity except
areas.

four very specific

In the intervening three years, BMI has failed to identify

a single breach of that Order by any of the Defendants.

It cannot

now simply rest on the existence of non-compete provisions which
agreed to suspend, especially in the absence of damages.

Summary

judgment is granted to Bittman, Scherch and Spellman on this issue.
VII. CONCLUSION
In the absence of any genuine issues of material fact on any
claim or counterclaim raised by BMI in the three cases addressed
herein,

summary judgment is granted in favor of Accuray,

Bittman, Scherch and Spellman.

Hill,

An appropriate Order follows.

October ~, 2011

, Wliliam :C. Standish
United States District Judge
94