Pittsburgh Logistics v. Ceravaolo, M.
135 WDA 2017
| Pa. Super. Ct. | Nov 14, 2017Background
- PLS required employees to sign employment agreements with non-solicitation and non-competition clauses; Hennings and Pakutz signed a later form, Ceravolo had an earlier, less restrictive form (and the later form was found unsupported by consideration for him).
- Paragraphs at issue: a 1-year non-compete (post-employment) and 1–2 year non-solicitation; the non-compete purportedly applied worldwide and contained a contractual clause that a court could reduce any overbroad provision to an enforceable scope.
- Ceravolo, Hennings, and Pakutz left PLS and went to work for BeeMac (a competing trucking business); PLS sought a preliminary injunction enforcing the covenants to bar their employment with BeeMac.
- After a three-day preliminary injunction hearing, the trial court held the worldwide geographic scope of the non-competes was facially overbroad and therefore unenforceable, and it declined to reform (blue-line) the covenants because the overbreadth indicated an improper intent and unclean hands.
- The Superior Court reviewed for apparently reasonable grounds and affirmed, finding the record supported that the employees did not have worldwide responsibilities and that equitable modification was improper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a world-wide non-compete is enforceable | PLS: worldwide scope is reasonable given its global business and the contract self-limits / permits court narrowing | Employees: clause is overbroad; employees didn’t have worldwide responsibilities so restriction is unreasonable | Held: Worldwide scope is geographically overbroad and unenforceable |
| Whether the court must reform (blue-line) an overbroad worldwide covenant | PLS: contract authorizes/mandates judicial reduction; court should narrow scope to reasonable territory | Employees: overbreadth shows intent to oppress/foster monopoly; equitable reformation is unavailable where relevant geographic could have been specified | Held: Court properly declined to reform; overbreadth and employer’s unclean hands bar equitable modification |
Key Cases Cited
- Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828 A.2d 995 (establishes highly deferential review and the essential prerequisites for preliminary injunctions)
- Socko v. Mid-Atlantic Systems of CPA, Inc., 126 A.3d 1266 (summarizes enforceability requirements for restrictive covenants)
- Sidco Paper Co. v. Aaron, 351 A.2d 250 (equitable power to modify covenants and limits where employer has unclean hands)
- Reading Aviation Serv., Inc. v. Bertolet, 311 A.2d 628 (worldwide, unlimited covenant void where relevant geographic area could have been specified)
- Victaulic Co. v. Tieman, 499 F.3d 227 (geographic scope must be roughly consonant with employee’s duties)
- Boldt Mach. & Tools, Inc. v. Wallace, 366 A.2d 902 (geographic restriction for sales reps limited to sales territory/customer base)