Therapy Source, Inc. v. Lidstone, C.
2431 EDA 2018
Pa. Super. Ct.Jun 28, 2019Background
- Therapy Source, founded 2001, operates a national therapy-staffing business built on a proprietary database and customer relationships. Two long‑time sales employees, Alice Forsythe (hired 2005) and Colleen Lidstone (hired 2010), signed employment agreements containing non‑disclosure, non‑solicitation, and two‑year non‑compete provisions; both signed revised agreements in 2016 tied to new compensation.
- In summer 2017 Forsythe and Lidstone left and formed Opening Doors Therapy, a direct competitor; evidence at hearing showed they contacted former Therapy Source customers and hired former Therapy Source contractors.
- Therapy Source sued (breach of contract, misappropriation, tortious interference, etc.) and moved for a preliminary injunction on January 19, 2018 to enforce the restrictive covenants.
- Two days of hearings were held; Therapy Source presented witnesses (including the founders and a computer‑forensics expert) and called Forsythe and Lidstone as on‑cross; defendants cross‑examined but did not present a defense case and moved for a demurrer at close of plaintiff’s case.
- The trial court granted a preliminary injunction (August 20, 2018) largely enforcing the agreements’ scope (two‑year restrictions against soliciting Therapy Source customers and hiring former employees/contractors); a subsequent order required Therapy Source to post a $500 bond, which it did.
- On appeal, defendants challenged (1) lack of bond in the injunction order, (2) the sufficiency of the record/claim that employment contracts were not in evidence, and (3) denial of opportunity to present a defense (due process). The Superior Court affirmed.
Issues
| Issue | Therapy Source's Argument | Forsythe/Lidstone's Argument | Held |
|---|---|---|---|
| Whether injunction was invalid because trial court failed to order plaintiff to file bond in the granting order | Rule 1531 requires plaintiff post bond; but bond was ordered three days later and posted, curing defect | Failure to include bond in the injunction order is fatal and cannot be cured after appeal (relying on precedent) | No reversible error: court cured omission by later order requiring bond and plaintiff posted it; Rule 1531 satisfied |
| Whether trial court abused discretion by finding plaintiff proved the six prerequisites for a preliminary injunction (including likelihood of success on the merits) | Employment agreements were supported by new consideration (revised compensation), covenants reasonable in scope/duration, plaintiff demonstrated likely success and irreparable harm from solicitation and hiring of its customers/contractors | Contracts were not properly in evidence; covenants allegedly unsupported by adequate consideration and geographically unreasonable | No abuse: record provided apparently reasonable grounds; court adopted trial judge’s detailed findings that covenants were incident to employment, supported by consideration, reasonable in duration/scope, and that plaintiff showed likely success and irreparable harm |
| Whether defendants were denied due process by being refused opportunity to present their case at preliminary injunction hearing | Plaintiff bore the burden and plaintiff presented witnesses; defendants cross‑examined and testified; they voluntarily moved for demurrer and conceded the court had enough evidence; thus no deprivation | Trial court cut off defendants from presenting evidence and therefore violated Pubusky due process precedent | No due process violation: defendants cross‑examined, testified, and attorneys moved for demurrer/consented that record was sufficient; court reasonably declined further evidence before ruling |
| Whether injunction terms were overbroad (duration/geography/scope) | Injunction mirrored the contractual restrictions (two years; limited to Therapy Source customers/contractors), narrowly tailored to protect goodwill and confidential information | Argued restrictions unreasonable and impair ability to work / were overly broad geographically | Court found restrictions reasonable given business model and customer list scope; injunction narrowly tailored to contractual terms |
Key Cases Cited
- Warehime v. Warehime, 860 A.2d 41 (Pa. 2004) (sets six prerequisites for preliminary injunction)
- Socko v. Mid‑Atlantic Sys. of CPA, Inc., 126 A.3d 1266 (Pa. 2015) (post‑employment non‑compete is enforceable if supported by new and valuable consideration)
- Sidco Paper Co. v. Aaron, 351 A.2d 250 (Pa. 1976) (equity may enforce restrictive covenants when reasonably necessary to protect employer)
- Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412 (3d Cir. 2010) (customer goodwill protection as legitimate employer interest)
- Walter v. Stacy, 837 A.2d 1205 (Pa. Super. 2003) (failure to file bond with injunction may be cured by subsequent order requiring bond)
- Santoro v. Morse, 781 A.2d 1220 (Pa. Super. 2001) (appellate review of preliminary injunction limited to whether record provides apparently reasonable grounds)
- Soja v. Factoryville Sportsmen’s Club, 522 A.2d 1129 (Pa. Super. 1987) (bond requirement in injunction practice)
- Duquesne Light Co. v. Longue Vue Club, 63 A.3d 270 (Pa. Super. 2013) (deferential standard of review for preliminary injunctions)