Shepherd v. Pittsburgh Glass Works, LLC
25 A.3d 1233
| Pa. Super. Ct. | 2011Background
- Appellee Shepherd sued to enjoin enforcement of a two-year non-compete in his September 29, 2008 PGW agreement after Kohlberg acquisition.
- PGW (a Kohlberg affiliate with ~60% ownership) created PGW in 2008; Shepherd’s title changed but core responsibilities remained.
- Shepherd alleged PGW failed to pay bench compensation under the agreement, which was the sole consideration for the non-compete.
- He was terminated April 30, 2009, then remained as a consultant through July 31, 2009; separation/severance issues arose.
- Shepherd offered a position with Central Glass (CGA) not publicly a direct PGW competitor, and PGW threatened to enforce the covenant; bench compensation payment became central to enforceability.
- Trial court granted a preliminary injunction preventing enforcement and required a $2,000 bond; PGW appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the non-compete reasonably designed to protect legitimate interests under PA law? | Shepherd argues the covenant is unenforceable due to lack of legitimate business interests. | PGW contends the covenant protects trade secrets and confidential information and is reasonable. | Yes, the court held the covenant was not reasonably designed to protect PGW's interests. |
| Would Shepherd inevitably disclose trade secrets if he joined Central Glass? | Shepherd would not disclose trade secrets; his role at CGA/Carlex did not require PGW secrets. | PGW asserted risk of disclosure through new employment. | Yes, the court held Shepherd would not inevitably disclose trade secrets. |
| Did Shepherd suffer irreparable harm and does balancing of harms favor him? | Enforcement would irreparably harm Shepherd due to age, market conditions, and unique opportunity ('purple squirrel'). | Enforcement would protect legitimate business interests and not irreparably harm PGW. | Yes, irreparable harm found and balance in favor of injunction. |
| Was bench compensation consideration properly analyzed for enforceability? | Bench compensation was the sole consideration sustaining the non-compete. | PGW argues consideration may be lacking due to severance/release documents. | Yes, consideration issue was properly considered and supported injunction. |
Key Cases Cited
- Insulation Corp. of America v. Brobston, 446 Pa.Super. 520, 667 A.2d 729 (Pa.Super. 1995) (consideration required for enforceability of covenants even if reasonable)
- Hess v. Gebhard & Co., 570 Pa. 148, 808 A.2d 912 (Pa. 2002) (protectable business interests threshold for enforceability of non-competes)
- WellSpan Health v. Bayliss, 869 A.2d 990 (Pa.Super. 2005) (balance test applicable after threshold interest established)
- Missett v. Hub Intern. Pennsylvania, LLC, 6 A.3d 530 (Pa.Super. 2010) (termination status can affect enforceability; not sole basis for voiding covenant)
- Overland Enterprise, Inc. v. Gladstone Partners, LP, 950 A.2d 1015 (Pa.Super. 2008) (distinguishes preventative vs mandatory injunctions; status quo standard)