WILLIAM W. CALDWELL, District Judge.
We are considering a Motion for Preliminary Injunction. (Doc. 2). This matter relates to an employment dispute between Adhesives Research, Inc. (Plaintiff) and its former employee, Susan Newsom (Defendant). Plaintiff alleges that by working for one of its competitors, Defendant breached a covenant not to compete, engaged in unfair competition, and will inevitably misappropriate trade secrets. (Doc. 1). On February 13, 2015, Plaintiff filed a Motion for Preliminary Injunction, seeking to enjoin Defendant from working for her current employer and from disclosing confidential information. (Doc. 2). For the reasons discussed below, we will deny Plaintiff's motion.
Plaintiff is a manufacturer of specialty tape. (Doc. 1 at 2; Doc. 19 at 21). It produces rolls of adhesives which it sells as a raw material to other businesses. (Doc. 19 at 21). Plaintiff's customers convert the tape into a final product that is sold to consumers in the medical, pharmaceutical, electronics, and industrial markets. (
Between September of 2000 and August of 2014, Defendant was employed by Plaintiff. Defendant worked for Plaintiff almost exclusively from her home in California. (Doc. 14-1 at 2; Doc. 19 at 42). She communicated with Plaintiff's headquarters by telephone on a daily basis, and she traveled to Plaintiff's Pennsylvania facility six to eight days a year to attend training and seminars. (Doc. 1 at 3; Doc. 14 at 2; Doc. 19 at 25, 64). For the first thirteen years of her employment, Defendant held the position of Medical Marketing Manager. (Doc. 19 at 22). In this position, Defendant was responsible for selling the company's products and services to customers in the western half of the United States. (Doc. 19 at 23). In 2013, Defendant was promoted to Pharmaceutical Business Manager. (Doc. 19 at 22). As business manager, Defendant was responsible for the oversight of Plaintiff's pharmaceutical sales force, and she assisted with the development and execution of Plaintiff's strategic business plan. (Doc. 19 at 27-28, 62). In both of Defendant's positions, she had access to Plaintiff's confidential business information, and she had frequent contact with Plaintiff's customers. (Doc. 19 at 23-26).
In January of 2012, intending to protect its confidential information, Plaintiff required all of its employees, including Defendant, to sign a "Confidentiality, Assignment, and Non-Compete Agreement." (Doc. 19 at 30; Pl. Ex. 3). The non-compete portion of the agreement provides, in pertinent part, as follows:
(Pl. Ex. 3 at 4). The agreement provides that it "shall be construed and enforced in accordance with the law of the Commonwealth of Pennsylvania, without regard to conflicts of law principles of Pennsylvania or any other jurisdiction." (Pl. Ex. 3 at 6) (hereinafter "choice of law clause"). Additionally, the agreement selects the forum where any legal proceeding related to agreement must be initiated:
(Pl. Ex. 3 at 15-16) (hereinafter "forum selection clause"). Believing that the terms were not negotiable, Defendant signed the agreement on January 31, 2012. (Doc. 14-1 at 2).
On August 15, 2014, Defendant terminated her employment with Plaintiff. (Doc. 14-1 at 2). In January 2015, she was hired by Scapa Tapes North America, LLC (Scapa) as a Senior Strategic Sales Executive for the western United States. (Doc. 19 at 55). Scapa is a "manufacturer of bonding products and adhesive components." (Doc. 19 at 35; Pl. Ex. 5 at 1). Primarily, Scapa converts its adhesives into a final product to be used by consumers in the electronic, healthcare, industrial, and automotive markets. (Doc. 19 at 45-47; Def. Ex. 1). By letter dated February 4, 2015, Defendant notified Plaintiff of her employment with Scapa. (Doc. 1 at 6; Pl. Ex. 7).
On February 13, 2015, believing that Defendant's employment with Scapa violates the non-compete agreement, Plaintiff filed a complaint alleging common law claims of breach of contract and unfair competition, as well as a statutory claim under the Pennsylvania Uniform Trade Secrets Act. (Doc. 1). On the same date, Plaintiff filed a Motion for Temporary Restraining Order and/or Preliminary Injunction. (Doc. 2). On February 18, 2015, we issued a temporary restraining order, enjoining Defendant from working for Scapa for a period of ten days. (Doc. 7). On February 26, 2015, we held an evidentiary hearing on the Motion for Preliminary Injunction. At the conclusion of the hearing, we vacated the temporary restraining order, allowing Defendant to return to work, and we instructed the parties to submit post-hearing briefing on the Motion for Preliminary Injunction within fifteen days from the date the transcript became available. (Doc. 19 at 79-80). The matter, now being fully briefed, is ripe for our consideration.
As a threshold matter, the parties dispute whether we enjoy personal jurisdiction over Defendant. Plaintiff argues that Defendant has sufficient minimum contacts with Pennsylvania such that we can exercise general jurisdiction. Alternatively, Plaintiff asserts that Defendant has waived any personal jurisdiction defense by agreeing to the forum selection clause contained in the non-compete agreement. Conversely, Defendant argues that her contacts with Pennsylvania are insufficient to establish general jurisdiction and the forum selection clause is unenforceable.
When a federal court is sitting in diversity, "[t]he Due Process Clause of the Fourteenth Amendment sets out the outer boundaries of [the court's] authority to proceed against a defendant."
Here, Defendant's contacts with Pennsylvania cannot satisfy this demanding standard. During Defendant's fourteen year employment with Plaintiff, she traveled to Pennsylvania six to eight days a year and had daily telephone contact with Plaintiff's headquarters. (Doc. 24 at 4). Assuming arguendo that these contacts with Pennsylvania can be characterized as continuous and systematic, a contention that we doubt, Defendant's contacts fall far short of being so constant and pervasive as to place her in the same category as those who are domiciled in Pennsylvania.
"Because the requirement of personal jurisdiction represents . . . an individual right, it can, like other such rights, be waived."
First, Defendant asserts that the forum selection clause in this case does not actually waive personal jurisdiction. (Doc. 14 at 6). Defendant emphasizes the first half of the forum selection clause: "Any legal proceeding arising out of or relating to this Agreement shall be instituted in the United States District Court for the Middle District of Pennsylvania,
It is a well-established rule of contract construction that a contract must be read, if possible, so that all provisions are given effect.
As we read it, the emphasized language speaks to subject matter jurisdiction. That is, if this Court does not have federal question or diversity jurisdiction over a legal proceeding arising out of the agreement, the proceeding must be brought in a court of general jurisdiction in York County. This interpretation not only makes the language effective, but unlike Defendant's interpretation, it is consistent with the remainder of the forum selection clause. The remainder of the clause states that "the Associate hereby consents to the personal and exclusive jurisdiction of such court and hereby waives any objection that the Associate may have . . . ." (Pl. Ex. 3 at 7). Because we interpret the language emphasized by Defendant as speaking to subject matter jurisdiction, and because the remainder of the clause unambiguously consents to this Court's personal jurisdiction over Defendant, we find that the forum selection clause does waive any personal jurisdiction defense.
Next, Defendant argues that it would be unreasonable to enforce the forum selection clause because the non-compete agreement was the product of overreach. (Doc. 14 at 6-7). To support her argument, Defendant points to our opinion in
Under federal law, enforcement of a forum selection clause is unreasonable if the clause itself, not the contract as a whole, is the product of overreach.
Moreover, while Defendant is quite right to cite our opinion in
Based on the foregoing, we find that Defendant has failed to make a "strong showing" that enforcement of the forum selection clause in this case is unreasonable. Accordingly, we find that Defendant has consented to our jurisdiction.
A district court will only grant a preliminary injunction if the moving party produces evidence sufficient to convince the court that: (1) there is a likelihood of success on the merits; (2) he or she will suffer irreparable harm if the injunction is denied; (3) granting relief will not result in even greater harm to the nonmoving party; and (4) the public interest favors such relief.
At the outset, the parties dispute which law applies to the merits of Plaintiff's claims. Plaintiff argues that the choice of law clause in the agreement dictates that Pennsylvania law governs. (Doc. 24 at 9-13). Defendant asserts, however, that under Pennsylvania's conflicts of law analysis, we should ignore the choice of law provision and apply California law. (Doc. 14 at 7-11). Because we find that Plaintiff is not likely to prevail under the law of either state, we need not resolve this dispute.
Pursuant to Section 16600 of the California Business and Professions Code, unless it falls within a statutory exception, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." CAL. BUS. & PROF. CODE § 16600. Interpreting Section 16600, the Supreme Court of California has declared that "covenants not to compete are void" in California, unless there is an exception.
Under Pennsylvania law, covenants not to compete are enforceable if they are (1) incident to an employment relationship between the parties, (2) reasonably necessary for the protection of the employer, (3) supported by consideration, and (4) reasonably limited in duration and geographic extent.
The geographic scope of a non-compete agreement is reasonably limited if it encompasses only such territory "as may be reasonably necessary for the protection of the employer without imposing undue hardship on the employee."
Here, despite Defendant's sale's territory consisting of the western half of the United States, the geographic restriction contained in the non-compete agreement extends to anywhere in the world where Plaintiff's products are sold. (Pl. Ex. 3 at 4). Because the breadth of the restriction is much larger than Defendant's sales territory, the restriction is not "roughly consonant" with Defendant's duties. Therefore, we find that the geographic scope is not limited to an area reasonably necessary to protect Plaintiff's interests.
Our finding of an overly broad geographic scope is not the end of our inquiry. Under Pennsylvania law, courts may exercise their equitable power to narrow an overly broad restriction.
When a covenant not to compete contains an unlimited geographic scope, although the nature of the business was such that a relevant geographical area could have been specified, the agreement is void, and courts may not use their equitable power to alter the agreement.
Here, at the time the parties entered into the contract, Plaintiff knew that Defendant's sales territory would consist of the western half of the United States. (Doc. 19 at 42). Despite this knowledge, the restrictions in the non-compete agreement are unlimited in geographic scope — they extend to the entire world. Therefore, the non-compete agreement provision is void under Pennsylvania law and not subject to equitable tailoring.
Irreparable harm exists when the injury is "of a peculiar nature, so that compensation in money damages cannot atone for it."
First, despite Plaintiff's arguments to the contrary, this court has held that the loss of customers due to solicitation by a former employee is not a harm that is irreparable.
Second, although this court has recognized the disclosure of confidential information as an irreparable harm, Defendant's employment with Scapa does not create a substantial threat or sufficient likelihood that confidential information will be disclosed.
An injunction in this case would prohibit Defendant from working for Scapa. As recognized by the Third Circuit, an "injunction prohibiting someone from pursuing his livelihood in the manner he chooses operates as a severe restriction. . . ."
Finally, this case involves dueling public interests. As recognized by Plaintiff, there is a public interest in "upholding the inviolability of trade secrets and enforceability of confidentiality agreements."
For the reasons discussed above, we find that Plaintiff has failed to produce sufficient evidence to convince us that a preliminary injunction is warranted. We will issue an appropriate order.