CENTIMARK CORPORATION v. LAVINE
Filing
70
MEMORANDUM OPINION Re: 42 Plaintiff's Motion to Convert Temporary Restraining Order to Preliminary Injunction and 50 Defendant's Motion to Dissolve or Modify Temporary Restraining Order. Signed by Judge Arthur J. Schwab on 7/28/2011. (lcb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CENTIMARK CORPORATION, a
Pennsylvania corporation,
Plaintiff,
11cv0757
ELECTRONICALLY FILED
v.
DONALD LAVINE, an individual,
Defendant.
MEMORANDUM OPINION RE: PLAINTIFF’S MOTION TO CONVERT
TEMPORARY RESTRAINING ORDER TO A PRELIMINARY INJUNCTION
(DOC. NO. 42) AND DEFENDANT’S MOTION TO DISSOLVE OR MODIFY
TEMPORARY RESTRAINING ORDER (DOC. NO. 50)
I.
Introduction
Presently before this Court are two motions, the first being Plaintiff, CentiMark’s Motion
to Convert Temporary Restraining Order (“TRO”) to a Preliminary Injunction (Doc. No. 42), and
the second being Defendant, Donald Lavine’s Motion to Dissolve or Modify TRO (Doc. No. 50).
After careful consideration of Plaintiff’s Motion to Convert TRO to a Preliminary Injunction
(Doc. No. 42), Memorandum in support thereof (Doc. No. 45), and Defendant’s brief in
opposition thereto (Doc. No. 65), Plaintiff’s Motion will be GRANTED. As to the second
motion, the Court has considered Defendant’s Motion to Dissolve or Modify TRO (Doc. No. 50),
Brief in support thereof (Doc. No. 54), and Plaintiff’s Brief in opposition thereto (Doc. No. 61).
Defendant’s Motion to Dissolve or Modify TRO will be DENIED.
II.
Factual Background
On June 8, 2011, CentiMark filed a Complaint against Lavine alleging breach of an
Employment Agreement because of his post-employment actions. Doc. No. 1. CentiMark filed
a Motion for a TRO and Preliminary Injunction on June 6, 2011, seeking that Lavine be enjoined
from: 1) working for a direct competitor; 2) actively soliciting the same customers that were his
accounts while employed by CentiMark; 3) diverting business and customers away from
CentiMark to a competitor; and 4) misappropriating CentiMark’s confidential information. Doc.
No. 4. On June 20, 2011, CentiMark’s Motion was granted. Doc. No. 18. Subsequently, on
June 29, 2011, Lavine filed a Motion to Dismiss for lack of personal jurisdiction or in the
alternative to change venue. Doc. No. 23. Said Motion was denied by this Court on July 20,
2011. Doc. No. 62.
This Court incorporates further facts as previously set forth in Doc. No. 62, 1-3.
III.
Discussion
In support of its Motion to Convert TRO to a Preliminary Injunction, CentiMark argues
that: 1) it has demonstrated a reasonable probability on the merits because Lavine knowingly
entered into his Employment Agreement with adequate consideration and then breached its
terms; 2) CentiMark will suffer irreparable harm due to the loss of customer relationships,
goodwill, and confidential information unless injunctive relief is granted; 3) greater harm to
Lavine would not result from an injunction to preserve the status quo; and 4) the requested
injunction will serve the public interest by protecting important business tools. Doc. No. 45.
In support of his Motion to Dissolve or Modify TRO, Lavine argues that: 1) the
Employment Agreement is not ancillary to his employment and thus is unenforceable;
2) enforcement of the covenant not to compete of the Employment Agreement is not reasonable
because CentiMark is overreaching by attempting to keep Lavine unemployed even though, he
was discharged involuntarily; and 3) if it is not dissolved, the TRO should be modified to allow
him to earn a living. Doc. No. 54. Because CentiMark and Lavine’s Motions address similar
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points and both involve application of the same legal principles, they will be addressed together
in this Memorandum Opinion.
According to applicable case law, when considering a motion for preliminary injunctive
relief or a TRO, this Court must consider four factors: 1) whether the movant has shown a
reasonable probability of success on the merits; 2) whether the movant would be irreparably
injured by denial of such relief; 3) whether granting the preliminary injunction or TRO will
result in greater harm to the nonmoving party; and 4) whether granting the preliminary injunction
would be in the public interest. S.I. Handling., Inc. v. Heisley, 753 F. 2d 1244, 1254 (3rd Cir.
1985). The Court will consider these factors in turn.
1. CentiMark’s Reasonable Probability of Success on the Merits
Both CentiMark’s argument that they have demonstrated a reasonable probability of
success on the merits and Lavine’s argument that CentiMark has not demonstrated the same are
premised on whether Lavine entered into a valid, enforceable Employment Agreement with
CentiMark, which undisputedly contained a covenant not to compete and other post-employment
obligations. Many of the same well-briefed arguments on this issue were previously brought
before this Court in support of and in opposition to Defendant’s Motion to Dismiss for Lack of
Personal Jurisdiction. See Doc. Nos. 25, 35.
Courts applying Pennsylvania law will enforce restrictive covenants which are: (1)
incident to an employment relationship; (2) reasonably necessary to protect the employer’s
interests, and (3) reasonably limited in duration and geographic scope. Victaulic Co. v. Tieman,
499 F.3d 227, 235 (3d Cir. 2007); Hess v. Gebhard Co. & Inc., 808 A.2d 912, 917 (Pa. 2008).
This Court has carefully considered each parties’ arguments pertaining to the validity of
Lavine’s Employment Agreement and finds that the Agreement and its post-employment
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obligations are valid and binding. First, as previously discussed in the Court’s Memorandum
Opinion denying Lavine’s Motion to Dismiss, Lavine’s argument that he effectively had “no
choice” but to sign the Employment Agreement is not persuasive. Lavine was in the process of
becoming an employee of CentiMark when he signed the Employment Agreement and therefore
no further consideration was required.
The present situation is distinguishable from George W. Kistler, Inc. v. O’Brien, 347
A.2d 311, 315-16 (Pa. 1975), upon which Lavine relies, for several reasons, including that it is
not conceded that all employment terms were finalized prior to signing the agreement which
refers to Lavine as a “pending employee” and “candidate for employment,” and the employment
application (Doc. No. 35-1) stated that an employment agreement would have to be signed prior
to employment. This application put Lavine on notice that signing the Employment Agreement
was a condition precedent to his employment. Lavine’s situation is distinguishable from Arthur
J. Gallagher Co. v. Reisinger, 2007 WL 1877895 (W.D. Pa. June 29, 2007), in which an
employment agreement was invalidated where the employee first learned of his employment
agreement containing a restrictive covenant over a month after he began his employment.
Here, as in Fisher Bioservices, Inc. v. Bilcare, Inc., 2006 WL 1517382 (E.D. Pa. May 31,
2006), Lavine had a choice to sign his Employment Agreement and no further consideration
beyond his employment with CentiMark was necessary. Enforcement of the Employment
Agreement is further supported because Lavine was permitted to have an attorney review the
Agreement and ask questions about such before he signed it. See Nat’l Bus. Sys., Inc. v. Wright,
2 F. Supp. 2d 701, 707 (E.D. Pa. 1998). The record, which demonstrates that consistent with
CentiMark’s practice Lavine was provided with a copy of an Employment Agreement prior to
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commencing his employment, supports the validity of the Agreement’s post-employment
obligations. Rudzik Dep. 78-79.
The Court also finds that the preliminary injunction is reasonably necessary to protect
CentiMark’s interests because Lavine had, and may still have through the “missing hard drive”,
access to a list of all CentiMark warranty customers, the date their warranty was set to expire,
and the customer’s contact information. Lavine Dep., 86-89. Because discovery was inhibited
by the “missing hard drive”, it is now impossible to verify Lavine’s statement that “all
documents relating to CentiMark in either electronic or hard copy form have been returned to
CentiMark.” As previously noted, this list, which details current and former customers of
CentiMark and when their warranties would expire would assist in solicitation of business, in
what both parties concede is a highly competitive market. Lavine Dep. 44-1, 48. Lavine also
developed long-term customer relationships with approximately 1,000 businesses (350 of which
he had sales activity with in his last two years of employment) and the skills necessary to solicit
their business over the twelve years that he worked for CentiMark. Rudzik Dep. Exh. Z. Indeed,
Lavine had no prior experience in the commercial roofing industry before he began his
employment for CentiMark. Lavine’s customer relationships and contacts gained while he
worked at CentiMark would be just as valuable to a competing company as access to
CentiMark’s written materials.1 This is evidenced by Great Lake’s recent emergence into the flat
roofing business when it had previously primarily focused on shingle roofing. Lavine Dep., 101,
1
Defendant’s reliance on Insulation Corp. of America v. Brobston, 667 A.2d 729 (Pa. Super.
1995) for the proposition that it is not reasonable to enforce a covenant not to compete against a
salesperson who is discharged for poor performance, does not apply, based upon the other factors
in this case: i.e. Lavine’s alleged downloading of confidential CentiMark information, former
manager Robert Rudik’s suspicion that he was planning to start his own business, failure to
report subsequent employment, and frustration of the discovery process. See Missett v. HUB
Int’l Pennsylvania, LLC, 6 A.3d 530, 539 (Pa. Super. 2010) for a discussion of other factors for
consideration.
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114. As such, the preliminary injunction enjoining Lavine from working for a competitor in the
same geographic area is reasonably necessary to prevent CentiMark’s information from being
used by its competition and Lavine from using his skills developed while at CentiMark to a
competitor’s advantage.
Finally, CentiMark’s post-employment covenant is reasonable because it is “within such
territory and during such time as may be reasonably necessary for the protection of the employer
. . . without imposing undue hardship on the employee.” Hayes v. Altman, 225 A.2d 670, 672
(Pa. 1967). Lavine’s post-employment covenant is reasonable because it restricts him from
solicitation of customers within 100 air miles of his former sales territory which extended at least
75 miles from Detroit and when Great Lakes Roofing (“Great Lakes”) competes in the same
geographic area. CentiMark has also submitted evidence that Lavine has contacted former
CentiMark customers which demonstrates that a preliminary injunction is reasonable to protect
CentiMark’s business relationships. See Lavine Dep. 114-18. Although he admits to being
involved in sales, it is unclear what role Lavine has taken at Great Lakes, and therefore, a
preliminary injunction incorporating the previous temporary restraining order will continue to
protect CentiMark until the Permanent Injunction Hearing. Lavine Declaration ¶ 12; Doc. No.
24.
2. CentiMark’s irreparable injury if a Preliminary Injunction is Denied
Irreparable harm is harm “of a peculiar nature” for which “compensation in money alone
cannot atone.” Opticians Ass’n of Am. v. Ind. Opticians of Am., 920 F.2d 187, 195 (3d Cir.
1990) (quoting Morton v. Beyer, 822 F.2d 364, 372 (3d Cir. 1987)). In cases involving
restrictive covenants, the “nature of the right that is injured” is the former employer’s legitimate
interest in protecting its business; as such, equitable relief is particularly appropriate. Nat'l Bus.
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Servs., Inc. v. Wright, 2 F. Supp .2d 701, 709 (E.D. Pa. 1998). An employer has a legitimate
interest in preventing an employee from leaving to work for a competitor, carrying with him the
employer's goodwill, specialized training, and confidential information. Id.
CentiMark’s main contention is that allowing Lavine to work in the same geographical
area and industry constitutes irreparable harm because of the loss of relationships, goodwill, and
confidential information which will result. Doc. No. 45, 7, Wellspan Health v. Bayliss, 869 A.2d
990, 997 (Pa. Super. Ct. 2005). This Court agrees that Lavine’s position as a former salesperson
for CentiMark gives him the customer relationships and information necessary to contact current
and prospective CentiMark customers on behalf of Great Lakes, thereby damaging CentiMark’s
current and potential customer relationships. Damage to customer relationships has been held to
constitute irreparable harm. See Coventry First, LLC v. Ingrassia, 2005 WL 1625042, at * 11
(E.D. Pa. July 11, 2005) (“[I]nterference with customer relationships satisfies the irreparable
harm requirement . . . . Because the violation of a covenant not to compete results in interference
with customer relationships causing nonquantifiable damages, such covenants are prima facie
enforceable in equity.”)
CentiMark’s position is strengthened by the vagueness of Lavine’s position with Great
Lakes. As previously noted, it is clear that Lavine is involved in sales for Great Lakes and
therefore he has the potential to irreparably harm business relationships that he helped to
cultivate while he worked for CentiMark.
This result is supported by the United States District Court for the Eastern District of
Pennsylvania’s decision in Telamerica Media Inc. v. AMN Television Mktg., 1999 WL 1244423,
(E.D. Pa. Dec. 21, 1999). There, the Court found that the defendant’s decision to join a
competing company was “highly likely to result in un-compensable damage” to the defendant’s
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initial employer. Id. at *6. In Telamerica, the employee’s knowledge of the former employer's
business practices could easily be passed on to the new employer, and “a jury would have great
[difficulty] assessing the damage that the use of said information would cause, beyond that of an
immediate loss of business.” Id. Finally, the Telamerica court found it relevant that the
restrictive covenant at issue “explicitly states that damages are inadequate and that the parties
agree to an injunctive remedy.” Id. Here, as in Telamerica, Lavine could cause “uncompensable damage” to CentiMark by sharing confidential CentiMark information with Great
Lakes and calling on his developed customer relationships that he acquired while working for
CentiMark. Beyond this, Lavine’s Employment Agreement states that Lavine acknowledged
“that the remedies at law for any breach by him of the provisions of this Agreement may be
inadequate and that CentiMark shall be entitled to injunctive relief against him in the event of
any breach.” Doc. 1 Ex. 2 ¶ 5.03. In short, Lavine has a real opportunity to harm CentiMark’s
legitimate business interests by working for Great Lakes, and thus, CentiMark has demonstrated
that it will suffer irreparable harm if Lavine is allowed to work without restriction.
3. Possible Greater Harm Suffered to Lavine if Preliminary Injunction is Granted
Lavine argues that the harm a preliminary injunction would cause him outweighs any
benefit that would accrue to CentiMark. Doc. 54 at 11. In cases involving restrictive covenants,
the harm to the employee “almost always seems greater than the harm to the company. . . . [T]he
employee, as an individual, apparently will have a hard time financially surviving if he is out of
work. By this superficial calculus, the harm to the employee is always greater.” Quaker Chem.
Corp. v. Varga, 509 F. Supp. 2d 469, 480 (E.D. Pa. 2007). That said, “the numerous courts that
have specifically enforced non-compete covenants against the employee have concluded that,
regardless of the relative wealth of the employer and employee, the harm to the employer trumps
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the harm to the employee.” Id. (citing Fisher Bioservs., Inc. v. Bilcare, Inc., 2006 WL 1517382,
at *12 (E.D. Pa. May 31, 2006); Graphic Mgmt. Assocs. v. Hatt, 1998 WL 159035, at *18 (E.D.
Pa. Mar.18, 1998)).
Despite his assertion of hardship, a preliminary injunction would not prevent Lavine from
working. He could work for Great Lakes or another roofing firm outside the Detroit market, or
in sales in a different industry in Detroit. As such, the Court cannot conclude that the harm to
Lavine would outweigh any benefit to CentiMark.
4. Public Interest
This Court also finds that a preliminary injunction in this case best serves the public
interest. Restrictive covenants of employment serve to protect businesses from competition from
former employees in the same industry. This protection serves an important business interest
and promotes capitalism and innovation. See Quaker Chemical Corp. v. Charles Varga, 509 F.
Supp. 2d 469, 481 (E.D. Pa. 2007). In the present case, enforcing Lavine’s Employment
Agreement with CentiMark through a preliminary injunction reinforces the binding effect of
employee obligations in valid employment agreements.
IV. Conclusion
A preliminary injunction incorporating the temporary restraining order already in place
best serves the four factors identified by the United States Court of Appeals for the Third Circuit
in S.I. Handling, 753 F. 2d 1244. It also maintains the “last, peaceable, noncontested status of
the parties.” Opticians Ass’n of Am., 920 F.2d 187. The terms already in place will not be
modified at this time because it is unclear what role Lavine has at Great Lakes and how
CentiMark can be protected if he would continue his employment with Great Lakes.
Specifically, protection is necessary because since Lavine’s employment with Great Lakes
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began, Lavine has had contact with CentiMark customers and Great Lakes has expanded into the
flat roofing business. Lavine Dep. 122-23. The Court will address these factors again at the
Permanent Injunction Hearing set for August 30, 2011. See Text Order of Court, July 18, 2011.2
s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc:
All Registered ECF Counsel and Parties
2
Nothing in this Memorandum Opinion relieves any party of its burden of proof at the August
30, 2011, Permanent Injunction Hearing. The Court will withhold its ruling on Plaintiff’s
Motion for Sanctions (Doc. No. 59) until after the Permanent Injunction Hearing.
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