MATTHEW W. BRANN, District Judge.
Pending before this Court is a Motion for a Preliminary Injunction
The Court conducted a preliminary injunction hearing on the matter on January 11, 2016, after which the parties were ordered to submit briefs to the Court regarding jurisdiction and choice-of-law by February 1, 2016. On Defendants' motion, the parties were subsequently given until February 10, 2016 to submit their briefs. On that date, Defendants docketed a letter with the Court indicating that the parties had reached an agreement on the issues, which precluded the need for the briefs. This matter is now ripe for the Court's consideration. For the following reasons, Provita's Motion for Preliminary Injunction is granted.
This case arises from an employment relationship between Provita and Defendant Kevin Marmor. Provita, a Northern Ireland company engaged in the business of marketing and selling animal health products, hired Mr. Marmor as a regional manager to expand sales in the United States. Provita and Mr. Marmor entered into a September 20, 2010 employment contract (hereinafter the "Employment Agreement"), in which Mr. Marmor agreed to accept employment with Provita under the Employment Agreement's terms and conditions.
Mr. Marmor's employment commenced on November 1, 2010. Mr. Marmor excelled at the company, quickly reaching "master level," and became national sales manager in 2011. In his various positions, Mr. Marmor traveled throughout the United States and sold Provita products on a national scale. Mr. Marmor was tasked with the responsibility of managing the entire network in the United States.
In July 2012, Michael Kerr, owner of Provita, formed Provita Animal Health, LLC (hereinafter "PAH"), a Florida limited liability company, to facilitate importing of Provita's products for sale in the United States and to facilitate payment for Provita's employees working in the United States. Accordingly, all Provita employees in the United States began working under PAH. As an employee in the United States, Mr. Marmor completed an I-9 and a W-4 for PAH and subsequently began receiving paystubs and W-2s from PAH.
Mr. Marmor was terminated from his employment on February 5, 2015. A month later, on March 6, 2015, Mr. Marmor formed Siloa Animal Health, LLC (hereinafter "Siloa"), a Pennsylvania limited liability company engaged in the business of marketing and selling animal health products.
On August 24, 2015, Provita filed a nine-count complaint against Defendants alleging, among other things, that Mr. Marmor breached the Employment Agreement.
Specifically, the Employment Agreement prohibited Mr. Marmor from disclosing, communicating, or using any confidential information for a period of one year after his termination from employment for any reason. The Employment Agreement further contained non-competition provisions prohibiting Mr. Marmor from directly or indirectly soliciting business from customers or clients of Provita for one year after termination from employment. It also prohibited Mr. Marmor from engaging in any enterprise conducting business activities that are the same or similar to Provita within the United States. The Employment Agreement also entitled Provita to enjoin or restrain Marmor from violation of the terms and provided for damages Provita sustained from breach of the agreement. Lastly, the Employment Agreement provided indemnification for Provita for reasonable attorney's fees and out-of-pocket costs related to a breach of the agreement.
Accordingly, Provita has filed the instant motion for preliminary injunction to enjoin Marmor from continuing to violate the Employment Agreement.
As noted above, Provita is a company organized under the laws of Northern Ireland. Mr. Marmor is a citizen of the United States who resides in Bloomsburg, Pennsylvania. Defendant Siloa is a limited liability company organized under the laws of Pennsylvania with a principal place of business in Bloomsburg, Pennsylvania. In its complaint, Provita alleges that the amount in controversy exceeds $75,000.00, exclusive of interest and costs.
The Employment Agreement at issue, however, provides that the parties will "submit to jurisdiction in Northern Ireland for adjudication of any disputes and/or claims between the parties under [the] Agreement. . . [and that] the parties hereby agree that the courts of Northern Ireland shall have exclusive jurisdiction over any disputes between the parties relative to this agreement."
The Supreme Court of the United States has held that a forum selection clause is presumptively valid and will be enforced by the forum unless the party objecting to its enforcement establishes (1) that it is the result of fraud or overreaching, (2) that enforcement would violate a strong public policy of the forum, or (3) that enforcement would in the particular circumstances of the case result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable.
The circumstances of this case support Provita's position that this Court has diversity jurisdiction under 28 U.S.C. § 1332 and that the venue is proper.
Litigation in the courts of Northern Ireland would likely be so seriously inconvenient as to be unreasonable because both Defendants are domiciled in Pennsylvania, Mr. Marmor resides in Pennsylvania, the cause of action arose in Pennsylvania, the claim under the UTSA arises under the laws of Pennsylvania, and the majority of the witnesses likely to be deposed and called to testify are located in the United States.
A federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state.
In the instant case, the Employment Agreement's forum selection clause has a choice-of-law provision stating that "[i]t is intended that this Agreement be valid and enforceable under the laws of Northern Ireland, and that the laws of Northern Ireland shall govern the agreement's interpretation."
While the parties have a substantial connection to Northern Ireland, Northern Ireland does not have a substantial relationship to the transaction at issue. Mr. Marmor is domiciled and Siloa is incorporated in Pennsylvania. The cause of action occurred in Pennsylvania. Furthermore, the majority of Mr. Marmor's activities under the Employment Agreement have taken place in the United States. Mr. Marmor has resided in Pennsylvania for over eight years, during the entire time he was subject to the terms of the Employment Agreement. Lastly, this Court has an interest in hearing the cause of action under the UTSA, a cause of action that would be unavailable to Provita if this case were litigated under the laws of Northern Ireland.
Federal Rule of Civil Procedure 65, which governs the granting of preliminary injunctions, provides in pertinent part:
It is well-settled that "[a] preliminary injunction is an extraordinary remedy never awarded as of right."
Provita alleges that Mr. Marmor's conduct subsequent to his employment with Provita constitutes a breach of the non-disclosure and non-competition terms of the Employment Agreement. The pertinent non-disclosure and non-competition clauses of the Employment Agreement read as follows:
Under Pennsylvania law, "restrictive covenants are enforceable if 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."
Provita argues that Mr. Marmor was an employee of Provita from November 1, 2010 through his termination on February 5, 2015 and that, consequently, Mr. Marmor was contractually bound by the Employment Agreement until February 5, 2016, twelve months after his date of termination. Mr. Marmor was, therefore, in breach of the non-competition clause when he formed Siloa on March 6, 2015, a company in the business of marketing and selling animal health products, including hoof care products and udder cream.
Mr. Marmor, on the other hand, argues that he was not bound by the Employment Agreement because he ceased working for Provita in July 2012, when he became employed by Provita Animal Health, LLC ("PAH"), the Florida limited liability company. He also argues that even if he were bound by the Employment Agreement, the non-competition covenant is not reasonably limited in scope. Lastly, Mr. Marmor argues that the information that Provita seeks to protect is not actually trade secret material.
Mr. Marmor argues that while he may have initially been bound by the Employment Agreement, he was not bound by it in February 2015 because his employment with Provita had ended in July 2012 when he became employed by PAH. In support of his argument, he offers evidence that he completed a W-4 and I-9 for PAH and received W-2s from PAH as his employer. Additionally, Mr. Marmor's business cards indicated that he was employed by PAH. Mr. Marmor testified that he was told by Mr. Kerr in a joking manner that he had been "fired for a day" and then was rehired by PAH. He testified that Mr. Kerr made several comments indicating that he would provide him with a new employment agreement to sign, but that one was never produced.
Provita maintains that Mr. Marmor was an employee of Provita at all times between November 2010 and February 2015. Provita argues that payment of Mr. Marmor by PAH is not indicative of separate employment because Provita and PAH are "substantially interrelated and jointly operated"
Provita also argues that Mr. Marmor was subject to the direction and control of Provita at all times between November 2010 and February 2015. It claims that Mr. Marmor reported directly to Mr. Kerr and that he regularly apprised Mr. Kerr of his travel schedule. Provita also contends that Mr. Marmor submitted expense reports directly to the Northern Ireland office. Provita argues that Mr. Marmor had traveled to the Northern Ireland headquarters on two occasions, the last of which was in March 2014 (after PAH was incorporated) but has never visited the PAH office in Florida. Additionally, Provita contends that it shared confidential client information (delineated below) with Mr. Marmor through early 2015.
Neither party challenges the contention that Mr. Marmor was an employee of PAH. The issue, however, is whether PAH is directly related to or a subsidiary of Provita, or whether PAH is a completely separate and distinct company.
The issue of whether a company is a subsidiary or distinct from a foreign corporation is typically examined in service of process, tax, or piercing the corporate veil controversies. The analysis used in those cases, however, may provide some guidance in analyzing the employment relationship in this case. Pennsylvania courts have held that, despite the "separate formal corporate existence of each company[,] . . . if the record demonstrates that the subsidiary is the `alter ego' of the parent to the extent that domination and control by the parent corporation renders the subsidiary a mere instrumentality of the parent . . ."
Additionally, the "economic reality test" may also be helpful to analyze whether PAH is Provita's subsidiary. The "economic reality test," first elucidated by the United States Court of Appeals for the Ninth Circuit in Donovan v. Sureway Cleaners
"When applying the economic reality test, the federal courts have looked at the totality of the circumstances and a single factor, by itself, is not necessarily determinative."
This Court is persuaded that PAH, while established separately from Provita, operates as a mere subsidiary of Provita. Mr. Kerr testified that PAH was created merely as a "legal necessity" to address the tax consequences of payment for Provita's employees working in the United States and to facilitate the payment of import dues in importing Provita product into the United States.
This Court is further persuaded that Mr. Marmor was an employee of Provita through the time of his termination in February 2015. The parties stipulated that at all times between November 2010 and February 2015 Mr. Marmor reported directly to Mr. Kerr,
Additionally, Provita submitted multiple email correspondence to and from Mr. Marmor using the email address "kevin.marmor@provita.co.uk" after July 2012, and as late as February 3, 2015, two days before his termination.
These exhibits support Provita's position that Provita and PAH were in fact interrelated and jointly operated and that there was no intention for PAH to operate as a separate and distinct company. Provita, in its closing argument, adroitly pointed out that had it been Provita's intention to fire Mr. Marmor in July 2012, Mr. Marmor would have been in breach of the Employment Agreement during the time he was employed by PAH. If PAH was not jointly operated and essentially the same company as Provita, Provita would have likely sought to enjoin Mr. Marmor's activities with PAH and would have certainly refrained from sharing customer lists and information with him.
As previously stated, to be enforceable, restrictive covenants must be reasonably limited in duration and geographic scope.
The determination of reasonableness of geographic scope will depend on a number of factors, including the scope of the area in which the employee has performed services and developed a customer base, as well as the geographic scope of the employer's business.
In Victaulic Co. v. Tieman,
Marmor argues that Provita has provided no evidence that it markets or sells its products in all 50 states. He contends that prohibiting him from working anywhere within the United States would be an undue hardship and would impair his ability to earn a living.
During the hearing, however, Mr. Kerr testified that while a Provita employee, Mr. Marmor's duties included maintaining and growing the business by interacting with dairy farmers, dealers, and distributors throughout the "entire United States."
The testimony during the hearing supports Provita's position that a nationwide geographic restriction is consistent with the nationwide scope of Mr. Marmor's job duties during his employment with Provita.
Provita also argues that Mr. Marmor violated the employment agreement by virtue of his ownership and operation of Siloa, his solicitation of the customers of Provita, and by his sale of products to customers of Provita. Mr. Marmor argues in response that the information Provita wants protected
A covenant must be reasonably necessary for the protection of the employer. To do this, a covenant must be tailored to protect legitimate interests.
Pennsylvania has adopted the Restatement of Torts definition of a trade secret:
In SI Handling Systems, Inc. v. Heisley,
The SI Handling Systems court listed six factors to consider in determining whether the information is a trade secret: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
A business' customer list is clearly one of the enumerated examples of trade secrets in the Restatement of Torts' definition noted above. "Customer lists which are readily and easily generated from trade journals, telephone book listings, or other sources of information available generally," however, are not granted protection.
Mr. Marmor testified during the hearing that Provita's confidential price lists are "not very" confidential.
Mr. Marmor also testified that customers can readily discover who is a Provita customer simply by networking at trade shows. He further argued that generating a customer list can be done by using the internet, networking, or simply by visiting farms and connecting with individual dairy farmers.
The parties stipulated, however, that Mr. Marmor contacted no less than eleven representatives of Provita customers after February 5, 2015.
The Court finds that the information Provita seeks to keep confidential falls within the definition of a trade secret. Mr. Marmor testified that the wholesale prices are not distributed to customers and that pricing is dependent on a variety of factors. He also testified that he himself compiled the customer lists while working for PAH and, therefore, the customer list was not easily created from an internet search or a phone book. Mr. Marmor also testified that he was a "one man show" and "did everything under the sun" while working for Provita, implying that he single-handedly built Provita's United States customer base.
Next, Provita must prove that it will suffer irreparable injury in the absence of a preliminary injunction. "The purpose sought to be achieved by the issuance of a preliminary injunction is `the avoidance of irreparable injury or gross injustice until the legality of the challenged action can be determined.'"
Provita argues that Marmor is utilizing confidential information obtained while he worked for Provita to directly solicit Provita's customers and is, therefore, purposefully interfering with Provita's business and customer relationships and will continue to do so if not enjoined by this Court. As described above, Mr. Kerr testified that at least three of the Provita customers that Mr. Marmor contacted after his termination either ceased buying Provita product or decreased their orders significantly. Mr. Kerr explained that Mr. Marmor has caused Provita substantial harm by his use of knowledge of Provita's pricing structure within the distribution network in order to sell his own products at lower prices, causing "confusion" among customers.
This Court agrees that Provita will continue to be irreparably harmed in the absence of this injunction. Mr. Marmor continues to directly compete against Provita, including at a trade show one week before the preliminary injunction hearing.
After determining that Provita would suffer irreparable injury in the absence of injunctive relief, this Court must then balance that injury with any harm that would be suffered by the Defendants if the preliminary injunction were to be entered. Provita cites two cases in support of its argument that this Court should not consider the harm that would come to Mr. Marmor because he engaged in unlawful conduct.
Provita's cases, however, are inapt. Most distinguishable is Peters v. Davis,
Nevertheless, this Court has found the non-compete clause reasonable in terms of time and geographic scope. While this Court recognizes that Mr. Marmor will suffer harm as a result of this injunction, it is not outweighed by the irreparable harm that Provita will continue to suffer absent a preliminary injunction.
The Court must consider whether granting the injunction would be contrary to public policy. Although there is a substantial public policy interest disfavoring labor preliminary injunctions, the remedy that the Court has fashioned here is narrowly tailored in both time as well as geographic scope. Moreover, the proprietary interests at stake in this case necessitate prompt judicial intervention in order to prevent irreparable harm.
For the foregoing reasons, the Court will grant Provita's motion for preliminary injunctive relief in its entirety.
An appropriate Order follows.