Socko, D. v. Mid-Atantic Systems of CPA, Inc. Aplt
126 A.3d 1266
| Pa. | 2015Background
- Mid-Atlantic employed David Socko as a salesperson (2007), rehired him in 2009, and in December 2010 while he was employed had him sign a new Non-Competition Agreement containing a two-year post‑termination noncompete covering multiple jurisdictions and an express statement that the parties “intend to be legally bound.”
- Socko resigned in January 2012, accepted a job with a competitor, was reported to his new employer, and then was terminated; Socko sued for a declaratory judgment that the noncompete was unenforceable for lack of consideration.
- It was undisputed the December 2010 agreement was executed mid‑employment and Socko received no new benefit or change in employment status in exchange for signing it.
- Mid‑Atlantic argued the Uniform Written Obligations Act (UWOA) — which provides that a writing containing an express statement that the signer intends to be legally bound "shall not be invalid or unenforceable for lack of consideration" — bars Socko from challenging the agreement for lack of consideration.
- The trial court and the Superior Court held the noncompete unenforceable because mid‑employment covenants require new and valuable consideration and the UWOA language did not supply adequate consideration for a restraint of trade.
- The Supreme Court affirmed: although the UWOA treats a signed writing with "intend[ing] to be legally bound" as removing lack‑of‑consideration defects generally, application of the statute to post‑commencement noncompetes would unreasonably vitiate Pennsylvania’s long‑standing rule that such covenants require new and valuable consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a post‑commencement employment noncompete signed without new consideration is unenforceable despite containing UWOA "intend to be legally bound" language | Socko: UWOA language does not excuse the special rule that post‑hire noncompetes must be supported by new and valuable consideration; allowing otherwise would nullify that rule | Mid‑Atlantic: UWOA prevents a party who says they "intend to be legally bound" from later challenging lack of consideration; thus the noncompete is enforceable even absent new consideration | Held: The agreement may be challenged; UWOA does not eliminate the requirement that post‑commencement noncompetes be supported by new and valuable consideration because applying the UWOA to those covenants would produce an unreasonable result and must be narrowly construed |
Key Cases Cited
- Morgan’s Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa. 1957) (discusses seal and the rule that a contract under seal imports consideration but recognizes exception for restraints of trade)
- Hess v. Gebhard & Co. Inc., 808 A.2d 912 (Pa. 2002) (sets factors for enforceability of noncompete: ancillary purpose, adequate consideration, reasonable scope, protect legitimate interests)
- Yocca v. Pittsburgh Steelers Sports, Inc., 854 A.2d 425 (Pa. 2004) (recognizes UWOA provision that writings stating intent to be legally bound avoid invalidity for lack of consideration)
- Pulse Technologies, Inc. v. Notaro, 67 A.3d 778 (Pa. 2013) (reaffirms requirement of new and valuable consideration for noncompetes executed after employment begins)
- McGuire v. Schneider, Inc., 534 A.2d 115 (Pa. Super. 1987) (interprets UWOA to remove lack‑of‑consideration defense but did not involve restrictive covenant)
- Gompers v. Rochester, 56 Pa. 194 (Pa. 1868) (early recognition that contracts in restraint of trade are exception to rule that a seal imports consideration)
- Jacobson & Co. v. Int’l Env’t Corp., 235 A.2d 612 (Pa. 1967) (explains situations where noncompete may be added after hiring but emphasizes need for new consideration)