Opinion
J-S19044-16 No. 1626 EDA 2015
04-19-2016
BENGAL CONVERTING SERVICES, INC. v. RYAN GIBNEY, Appellant
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Order entered May 18, 2015 in the Court of Common Pleas of Montgomery County, Civil Division, No. 15-09220 BEFORE: BENDER, P.J.E., STABILE and MUSMANNO, JJ. MEMORANDUM BY MUSMANNO, J.:
Ryan Gibney ("Gibney") appeals from the Order granting emergency injunctive relief to Bengal Converting Services, Inc. ("Bengal"). We affirm the Order, as modified in accordance with this Memorandum.
In its Opinion, the trial court set forth its findings of fact, which we adopt herein for this appeal. See Trial Court Opinion, 7/23/15, at 1-4.
On April 30, 2015, Bengal filed a Complaint for Emergency Injunctive Relief based on Gibney's violation of the confidentiality and non-compete covenants included in his employment agreement with Bengal ("Employment Agreement"). On May 18, 2015, the trial court entered an Order granting a temporary preliminary injunction to Bengal ("the injunction Order"). Thereafter, Gibney filed a timely Notice of Appeal and a court-ordered Statement of Matters Complained of on Appeal.
On appeal, Gibney raises the following issues for our review:
1. Did the trial court err by enforcing[,] until May 15, 2017[,] the two-year non-compete provisions in the [E]mployment [A]greement entered on September 16, 2013[,] between Bengal [] as the employer, and [] Gibney[,] as the employee[,] where Gibney's employment by Bengal had been terminated on December 31, 2013[,] when Bengal removed Gibney from its payroll, and thereafter Gibney was paid as a subcontractor by Monterey Leasing LP ["Monterey"], and issued an IRS Form 1099 for his work?Brief for Appellant at 4-5.
2. Did the trial court err by enforcing the non-compete provisions in the Employment Agreement beyond the scope of the restrictions contained in the Employment Agreement that limited Gibney's employment within 200 miles of Bengal's business location?
3. Did the trial court err by failing to conclude that Bengal breached the Employment Agreement with Gibney because Bengal failed to pay Gibney the compensation to which Gibney was entitled under the terms of the Employment Agreement, and Bengal was thereby barred from equitable relief by the doctrine of unclean hands?
4. Did the trial court err by incorrectly concluding that Gibney engaged in competition with Bengal when Gibney sold paper for Edgewood Paper Company ["Edgewood"], which is a "broker," not a competitor of Bengal, which is a "converter[?]"
5. Did the trial court err by deciding [that] the experience, knowledge and skill obtained by Gibney[,] as a result of his employment by Bengal, was confidential information that belonged to Bengal, and was entitled to protection as Confidential Material under the terms of the Employment Agreement?
6. Did the trial court err by granting an injunction where Bengal failed to provide evidence to support the prerequisites for injunctive relief?
The Argument section of Gibney's brief on appeal does not correspond to his Statement of Questions Involved. See Pa.R.A.P. 2119(a). Thus, we have attempted to locate within Gibney's brief the portions of his Argument which correspond to the questions he raises on appeal.
The purpose of a preliminary injunction is to prevent irreparable injury or gross injustice by preserving the status quo as it exists, or as it previously existed before the acts complained of in the complaint. Ambrogi v. Reber , 932 A.2d 969, 974 (Pa. Super. 2007).
[O]n an appeal from a decree ... granting ... a preliminary injunction, we will not inquire into the merits of the controversy, but will, instead, examine the record only to determine if there were any apparently reasonable grounds for the actions of the court below. Moreover, we will not pass upon the reasons for or against such action unless it is plain that no such grounds existed or that the rules of law relied on are palpably wrong or clearly not applicable.Sidco Paper Co. v. Aaron , 351 A.2d 250, 257 (Pa. 1976) (internal citations and quotation marks omitted).
In his first issue, Gibney contends that, as of September 16, 2013, he was employed by Bengal as an at-will employee under the terms of the Employment Agreement, and subject to termination for any reason or no reason. Brief for Appellant at 27. Gibney asserts that, beginning January 1, 2014, Bengal unilaterally converted Gibney to subcontractor status, and his pay was drastically reduced. Id. at 25-26. Gibney claims that, by changing his employment to subcontractor status, Bengal terminated his at-will employment status. Id. Gibney contends that, because his employment under the Employment Agreement terminated as of December 31, 2013, the two-year non-compete covenant contained therein must terminate as of December 31, 2015. Id. at 25. Gibney argues that such termination is consistent with the definition of "Separation of Service" found in the Employment Agreement. Id. Gibney contends that the trial court erred by concluding that he continued to be employed by Bengal, under the terms of the Employment Agreement, until May 15, 2015, even though he was no longer paid as an employee, and his pay was drastically reduced from the amount promised in the Employment Agreement. Id. at 28. Gibney asserts that the trial court improperly expanded the terms of the Employment Agreement by extending the non-compete restriction until May 15, 2017. Id. at 25-26. Gibney further asserts that the restriction on his employment should not have been enforced under the circumstances of this case, and the trial court erred by enforcing the restriction beyond December 31, 2015. Id.
The Employment Agreement provides that "Separation of Service" means "the termination of employment, whether voluntary or involuntary, for 'cause' or without 'cause,' and whether as a result of death, disability or the cessation of business of [Bengal]." Employment Agreement, 9/17/13, at 6.
The trial court addressed Gibney's first claim, set forth the relevant law, and concluded that, because the Employment Agreement was entered into between Gibney, on the one hand, and Bengal and its affiliates on the other, Gibney's change in employment from an employee of Bengal to a contractor of its affiliate, Monterey, did not operate to terminate the Employment Agreement. See Trial Court Opinion, 7/23/15, at 5-9; see also id. at 8-9 (finding that, up until his termination on February 16, 2015, Gibney was, in fact, an employee of Bengal, as he used a car, cell phone and computer supplied by Bengal, and was required to work fixed hours from Bengal's place of business). Our review of the record discloses apparently reasonable grounds for the trial court's determination, and, having found no abuse of discretion, we affirm on this basis as to this issue. See id. at 5-9.
In his second issue, Gibney contends that the scope of the injunction Order entered by the trial court exceeds the scope of the covenant not to compete included in the Employment Agreement, and is per se overly broad. Brief for Appellant at 29. Gibney points to the 200-mile restriction contained in the Employment Agreement's covenant not to compete, and asserts that the trial court's injunction Order contains no such restriction. Id. at 29. Gibney claims that, in its Opinion, the trial court acknowledged its error, but noted that the 200-mile limitation "does not affect the prohibition against soliciting Bengal's customers, who might be anywhere." Id. (citing Trial Court Opinion, 7/23/15, at 9).
The non-compete covenant in the Employment Agreement provides, in relevant part, that "the Employee shall not, within a two hundred (200) mile radius of any business location of [Bengal,] ... be employed by ... any business that provides services or products that compete with the business then being conducted by [Bengal] ...." Employment Agreement, 9/17/13, at 4.
Gibney also points to the restriction in the trial court's injunction Order that he not "solicit any customer or former customer of Bengal," and contends that the restriction is overly broad, because there is no way for Gibney to know who is or was a customer of Bengal. Brief for Appellant at 26. Gibney further asserts that no other employer can hire him without knowing Bengal's customers, or they run the risk of participating in Gibney's violation of the injunction Order. Id. at 29-30. Gibney did not raise this issue in his Statement of Matters Complained of on Appeal. Therefore, it is waived. See Korman Commercial Properties , Inc. v. The Furniture.com , LLC , 81 A.3d 97, 102-03 (Pa. Super. 2013) (holding that, if an appellant is directed to file a concise statement of matters to be raised on appeal pursuant to Pa.R.A.P. 1925(b), any issues not raised in that statement are waived).
The trial court addressed Gibney's second claim, and agrees that the restriction in the injunction Order, that Gibney not "compete with Bengal in paper sales and converting for two years," should be amended to add the phrase "within 200 miles of any business location of Bengal Converting." Trial Court Opinion, 7/23/15, at 9. We agree with the reasoning of the trial court. Accordingly, the injunction Order must be modified to include, at the end of paragraph "a," the phrase "within 200 miles of any business location of Bengal Converting."
In his third issue, Gibney contends that, by entering its injunction Order, the trial court granted equitable relief to Bengal, despite its unclean hands. Brief for Appellant at 35. Gibney asserts that Bengal never provided him with a $1,000,000 life insurance policy that it had promised to provide to Gibney in the Employment Agreement. Id. Gibney claims that, because Bengal breached the Employment Agreement, it should not be permitted to compel Gibney's performance under the Employment Agreement. Id.
In its Opinion, the trial court addressed Gibney's third claim and concluded that it lacks merit, stating as follows:
Page two of the [Employment A]greement contains a handwritten notation concerning $2[,000,000] in life insurance, half to "wife" and half to "SHK or Bengal[.]"[] The [Employment A]greement does not state who was to pay for this insurance, and the court finds from this testimony[,] and the fact that the policy in favor of [Gibney's] wife was paid for by payroll deductions from [] Gibney, that Bengal [] complied with its part of the [Employment A]greement.Trial Court Opinion, 7/23/15, at 2; see also N.T., 5/15/15, at 130-32 (wherein Scott Korn testified that Bengal paid for the $1,000,000 portion of the $2,000,000 life insurance policy that was to benefit Bengal in the event that Gibney died, but that Gibney was required to pay for the other $1,000,000 portion of the policy that was to benefit his wife). Our review of the record discloses apparently reasonable grounds for the trial court's determination, and, having found no abuse of discretion, we affirm on this basis as to this issue. See Trial Court Opinion, 7/23/15, at 2, 10; see also N.T., 5/15/15, at 130-32.
The trial court further determined that, if a breach of the Employment Agreement by Bengal had, in fact, occurred, then Gibney had waived the breach by failing to assert it in a timely fashion. See Trial Court Opinion, 7/23/15, at 10.
In his fourth issue, Gibney asserts that the restriction in the injunction Order that he not compete with Bengal in "paper sales and converting" is limitless, overly broad, and extends beyond the intent of the restrictive covenant included in the Employment Agreement. Brief for Appellant at 26. Gibney asserts that this restriction should be limited to the converting business, in which Bengal is engaged, and should not preclude Gibney from engaging in paper sales generally. Id. at 26, 30-31. Gibney asserts that Bengal competes with other converters in a commodity business, and that Gibney is neither a converter nor a broker. Id. at 30. Gibney claims that the trial court's reasoning that paper mills and brokers compete with converters constitutes "faulty logic," "is unsupported by the record, and ignores the reality of business." Id. at 30. Gibney further asserts that the injunction Order is unenforceable because it eliminates or represses competition, and is not reasonably necessary to protect Bengal because Bengal, as "a twenty million dollar company with millions of dollars of plant, machinery and equipment[,]" needs no protection from Gibney. Id. at 30, 31.
Additionally, Gibney claims, the only thing that Bengal established at the injunction hearing was that Edgewood filled a $35,000 order to The Flyer, which caused no harm to Bengal because it did not have inventory to fill the order. Id. at 32. Gibney contends the business of selling a commodity like paper depends on price and availability, not on a relationship with a particular vendor or employee. Id. Gibney asserts that, contrary to the trial court's finding otherwise, the testimony at the injunction hearing established that customers reach out to numerous suppliers to locate available product at the prevailing market price, and that "anybody will buy from anybody." Id. at 32-33.
In its Opinion, the trial court addressed Gibney's fourth claim and concluded that it lacks merit, stating as follows:
The business of Bengal [] is paper products for commercial printers and publishers. These companies have three sources for paper products: manufacturer or mills, brokers, and converters. The business [sic] of brokers and converters overlap considerably. Brokers sell to printers products from several sources, and converters sell to printers products they convert to meet the needs of those customers, using specialized machinery. Where ever [sic] the paper comes from[,] it is purchased by the printers and publishers to meet their particular needs. Whether a broker gets it from a mill, in odd lots[,] or from a converter does not matter to the customer. Likewise, it does not matter to these customers if a converter makes a paper product by converting some other product[,] or buys and re-sells paper from odd lots or a mill. Therefore, the court finds [that] brokers and converters are competitors.Trial Court Opinion, 7/23/15, at 3-4; see also id. at 10-11. Our review of the record discloses apparently reasonable grounds for the trial court's determination, and, having found no abuse of discretion, we affirm on the basis of the trial court's Opinion as to this issue. See Trial Court Opinion, 7/23/15, at 3-4, 10-11.
Bengal [] was able to find a number of documents that showed [] Gibney was competing with it. [] Gibney asked customers of Bengal to change his contact information from Bengal to his personal email address and telephone number, and then told them he was now selling paper independently. Bengal also offered into evidence an email in which [] Gibney disparaged Bengal []. After repeated denials, [Gibney] finally admitted he knew how Bengal formulated its prices, and, on at least a few occasions, admitted he undercut Bengal's prices to its customers. Bengal offered evidence that [] Gibney sold paper to The Flyer, GreenCross, Inc., Printwell, Shweiki, Seckman, Angstrom, California Offset and other customers of Bengal. He tried to get through to other Bengal [] customers.
In his fifth issue, Gibney contends that, to the extent that confidential information was in jeopardy of being disclosed, the trial court's injunction Order sufficiently protected that information, without the need to also bar Gibney from gainful employment. Brief for Appellant at 33. Gibney asserts that he did not need or even use any Bengal confidential information, and that he has no pricing information to undermine Bengal's ability to sell. Id. at 34. Gibney claims that he had access to all the buyers and sellers in the industry through sources other than Bengal, and that he can work in the paper industry without using any Bengal proprietary information. Id. Gibney argues that the "confidential information" that Bengal seeks to protect is the knowledge, skill and mental ability obtained by Gibney while working for Bengal, which is not the property of Bengal. Id.
In its Opinion, the trial court addressed Gibney's fifth claim and concluded that it lacks merit, stating as follows:
[Gibney] sold paper for Edgewood [], a paper broker and competitor of Bengal[], located in Yardley, Pennsylvania, within 70 miles of Bengal['s] place of business. [Gibney] sold to customers of Bengal [] through Edgewood and other companies. The court rejected [] Gibney's assertions that purchasers of printing paper could be found through a Google® search, because, while that may be so, this is not how people are able to sell paper. Those doing the purchasing will not talk to just anyone, and [] Gibney was able to get through to them because they knew him from Bengal []. There is no dispute that [Gibney]
was selling to Bengal['s] customers. It took Bengal years to develop these customers. [] Gibney's claim that he was not competing with Bengal[,] because it [sic] and broker's paper came from different sources[,] is not credible. Printing paper is printing paper, and what matters to printers is that the paper meets their needs and comes for the right price from someone they trust. Whether it comes from a broker[,] or converter[,] or directly from a mill does not matter. As far as competition goes, what matters is the willingness of those purchasers to speak to the person selling it. [] Gibney gained his entrée to them through his employment at Bengal [].Trial Court Opinion, 7/23/15, at 4; see also id. at 11. Our review of the record discloses apparently reasonable grounds for the trial court's determination, and, having found no abuse of discretion, we affirm on this basis as to this issue. See Trial Court Opinion, 7/23/15, at 4, 11.
In his final issue, Gibney contends that the trial court used the wrong standard, and, prior to entering its injunction Order, failed to consider the relative hardship that the injunction Order would impose on Gibney, or Bengal's need for protection. Brief for Appellant at 31-32. Gibney claims that he has no specialized training, other than "a little more than three years of experience in the paper industry at Bengal[,]" and that any harm that he "could possibly cause to a multimillion dollar enterprise like Bengal, is negligible, and was unsubstantiated by Bengal at the injunction hearing." Id. at 32. Gibney argues that he is irrelevant in the marketplace and that Bengal needs no protection from him. Id. at 31. Gibney asserts that the injunction Order renders him unemployable in his best field for two years beyond the scope of the Employment Agreement. Id. at 32.
The trial court addressed Gibney's final issue, set forth the relevant law, and concluded that it lacks merit. See Trial Court Opinion, 7/23/15, at 11-13. Our review of the record discloses apparently reasonable grounds for the trial court's determination, and, having found no abuse of discretion, we affirm on this basis as to this issue. See id.
Having determined that there are apparently reasonable grounds upon which the trial court determined that equitable enforcement of the restrictive covenants in the Employment Agreement was necessary to protect Bengal against wrongful appropriation of its customer relationships by Gibney, we agree with the trial court's determination that Bengal is entitled to injunctive relief, but modify the injunction Order, as specified above.
Order modified in accordance with this Memorandum, and as modified affirmed. Jurisdiction relinquished.
Judge Stabile joins the memorandum.
P.J.E. Bender concurs in the result. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 4/19/2016
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