Custom Building Systems, LLC v. Nipple, R.
127 MDA 2017
| Pa. Super. Ct. | Oct 31, 2017Background
- William French owned CBS, PBS (manufacturers), PSS (software), and AMT (transport); Ronald Nipple was hired as CBS general manager under a 2005 employment agreement containing a three‑year non‑solicitation covenant restricting direct or indirect sales to customers who purchased from the Companies in the 12 months before his employment ended.
- CBS terminated Nipple in April 2007. In early 2008 Icon (a competing modular-home maker) and Icon Legacy Transport formed; Connie Nipple invested and served as secretary; Kevin Hicks became Icon president; Ronald maintained an office at Icon and occasionally advised but was not an employee until April 2010.
- Icon sold modular homes to many of CBS/PBS’s prior customers during Nipple’s restricted period. Appellants sued Appellees (the Nipples, Hicks, Icon entities) alleging breach of contract, tortious interference, and civil conspiracy, among other claims.
- During litigation Appellants discontinued fiduciary-duty and trade‑secret claims; Appellees moved for summary judgment on the remaining claims, which the trial court granted on December 30, 2016. Appellants appealed; the Superior Court affirmed.
- The courts concluded the record lacked evidence that Ronald Nipple directly or indirectly made sales to restricted customers or that Appellees acted unlawfully or intended to harm Appellants; consequential damages were not proven.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a genuine issue exists that Nipple indirectly sold to restricted customers in violation of the non‑solicitation covenant | Icon sold to 28 restricted customers during the restricted period and Nipple was the key actor behind Icon, so he indirectly violated the covenant | Record shows Nipple only provided advisory support, had no sales role; covenant doesn’t bar Icon or its employees from dealing with those customers | No genuine issue; insufficient evidence Nipple engaged in direct or indirect sales; summary judgment for defendants |
| Whether enforcing the covenant as Appellants urge would bar Nipple from working in the industry | Enforcing the covenant’s “indirect” language should prevent Nipple from serving in any capacity that reaches restricted customers | The Agreement does not prohibit Nipple from competing or working in the industry; Appellants’ expansive reading is overbroad | Court refused Appellants’ broad construction; applying it would unreasonably restrain Nipple’s career; covenant not read to prohibit all industry work |
| Whether Appellants showed tortious interference with prospective contracts with prior customers | Prior customer quotes and relationships created a reasonable likelihood those customers would have contracted with Appellants absent Icon’s conduct | Quotes and past dealings do not establish a reasonable probability of future contracts; customers are free to solicit bids | No reasonable probability shown; element of prospective‑relationship not proved; summary judgment proper |
| Whether Appellants proved civil conspiracy | Appellees concealed Nipple’s involvement, hired salesmen with former CBS/PBS accounts to target restricted customers, showing a conspiracy to violate the covenant | Actions alleged were lawful business activity; no unlawful act or unlawful means and no proof Nipple violated covenant | No civil conspiracy: plaintiffs failed to show unlawful act, overt act in furtherance, or requisite proof of damages |
Key Cases Cited
- Chenot v. A.P. Green Services, Inc., 895 A.2d 55 (Pa. Super. 2006) (summary judgment standard and review on appeal)
- Krishack v. Milton Hershey School, 145 A.3d 762 (Pa. Super. 2016) (requirement that verdicts not rest on speculation)
- Profit Wize Marketing v. Wiest, 812 A.2d 1270 (Pa. Super. 2002) (contract interpretation principles; intent controls)
- Phillips v. Selig, 959 A.2d 420 (Pa. Super. 2008) (elements for tortious interference with prospective contractual relations; "reasonable probability" standard)
- Goldstein v. Philip Morris, Inc., 854 A.2d 585 (Pa. Super. 2004) (elements and proof standard for civil conspiracy)
- Lackner v. Glosser, 892 A.2d 21 (Pa. Super. 2006) (elements required for breach of contract claim)