*1 recognizes the these Court shares views, This appraisal the insured. clause to real value and less burdensome a more convenient clause affords dispute resolving the amount of the over method controversy costly leaving more entire loss than may litigation. time-consuming Our Court court deny right enforce this benefit, an insured deny paid premiums, an more than we could premiums. right insurance carrier its to receive early recog- appraisal legislatively-mandated clause, currently consumerism, as nition of is known what can- the insurer. This Court not be discarded may unilaterally agree free itself that the insurer statutorily-imposed contractually-required appraisal obligations. record for further and the remanded
Decree reversed ap- opinion. proceedings consistent with this Costs pellee. money the insurance with which to reconstruct so he would hare litigation. building expense delay without incident right Obviously not be which he should denied.” this is valuable Appellant, Company, v. Bello.
Girard Investment Argued January *2 Before 1974. 10, C. Jones, J., and Mander- Eagen, O’Brien, Nix Rоberts, Pomeroy, INO, JJ.
Otis W. him Erisman, with William L. Gaunt, Arthur L. Jenkins, Truscott Jr., Erisman, Smith, Aker, Grossman, Jenkins, for Hollinger ap- ian t. L.
Daniel for appellee. Quinlan, Opinion Mr. Justice Eagen, April 1974: In action in this equity, chancellor entered an nisi and decree in favor adjudication of defendants. Exceptions and the plaintiff were dismissed, made final. The plaintiff decree nisi was filed this appеal. is as follows. background factual April
On entered 9, 1962, appellee, Bello, into contract of with the employment Girard In- written Company [Girard], employment This con- vestment a restrictive tract contained for a “13. That one period states: of year which after my employment reason any the termination indirectly, or directly in any way, nоt engage will business, the Employer’s with competitive any manner work or way other nor solicit or any city or the business, or assist any competitive I shall which thereof territory or trade environs year prior within one employed been located or have such termination.” employ- terminated
On October established next day on the ment Girard, with Company Bell Discount his own Consumer concern, had been thereof. Bello himself with [Bell], president August the middle employed from continuously tem- one brief until his cessation of employment, manager of as branch assignment porary elsewhere, Girard. office of Square-Norristown the Logan action brought Girard On November 16, 1972, *3 employ- continuing from enjoin Bello to equity in Logan consumer discount business ment in the Bell from and enjoin “trade to territory” Square’s in- A preliminary in their business. employing and December 5, 1972, followed on junction hearing on denied was injunction preliminary the requested held Jan- final hearing A was 1972. December 15, filed the chancellor and on May 29, 1973, uary 30,1973, excep- nisi. Girard filed and decree adjudication heard were adjudication, which the chancellor’s tions to Au- dismissed on eventually en court banc by the gust 28,1973. not general held “that chancellor of the employ- 13 paragraph compete contained for necessary reasonably pro- not
ment contract an hardship undue and constitutes of Girard tection due to its broad overly Defendants [appellees] on the limitations.” geographic covenants not (covenants
Restrictive if are limit- only they reasonably are valid to compete) geographic extent and are time, ed duration
223 “reasonably necessary for the of the em ployer imposing hardship . . . without undue on the employee. (f) . .” §516 . Rеstatement of Contracts, (1932); Jacobson & Inc. v. International Environ Co., Corp., ment (1967); Pa. 427 A. 2d 620 439, 452, Morgan’s Equipment Corp. Home v. Martucci, Pa. (1957). A. 2d 618, 628, 136 Albee Accord, Inc. v. Homes, Caddie Pa. A. Homes, Inc., 417 2d 768 chancellor determined respects: (a) covenant involved was it deficient two overly geographic (b) was broad it con extent; unnecessary protеction employer, stituted for the while placing employee. an undue burden on the Since, we agree that, under the the covenant circumstances, was reasonably necessary protection, employer’s we will affirm the decree.1 Morgan’s Equipment Corp.
This Court in Home v. supra, concerning announced the Martucci, standard reasonably necessary protec- employer’s what is an tion. We there stated: reasons “[Different motivate upholding general compete covenants ancillary employment. employe may which are An specialized training receive and learn the carefully guarded methods of which are particular enterprisе. prevent the trade secrets aof To employe utilizing such and informa- competition employer, tion in with his former public patronage large, restrictive covenants They are entered into. enforced courts as *4 reasonably necessary protection employer.” the the of at 136 A. 2d 846. Also Id. see Restatement of (f), (h) (1932). §516 comment Contracts, present Clearly, of in none these elements are we are convinced there is no case; furthermore, and, employees, mandated of It be noted Girard all should they capacity served, sign what to matter in same no the restrictive question. here in covenant
224: upon employer by placed em- hardship the unduе employment, it ployee’s that would allow cessation of upon place Bello.2 a restriction to such bear own costs. Each Decree affirmed. side in the result. Chief Justice Jones concurs Mr. Pomeroy opinion dissenting tlie Mr. accuses of Justice The reasonably majority restricting is their of what consideration employer neсessary protection to whether there was of the for the by employee special em from his received or skills paragraph opinion, ployer. However, of this in the last as indicated Morgan, supra, as as elements mentioned in well we considered the employer possible re to invoke such a for the all other reasons justification. striction, such but were unable to discover Pomeroy:
Dissenting Opinion Mr. Justice departure majority opinion represents a marked The precedent in area of restrictive from established respectfully dissent. covenants. agree applicable is to be found
We all that the law Chapter of the Restatement of Cоntracts specific question whether before is therefore, us, non-competition entered into between employer, Co., Bello and his Girard Investment reasonable restraint of trade as defined Restatement bargain agent (f) or §516 “A an assistant, servant, : compete during employer, principal, or with his agency, thereafter, or or of the term territory during time be such as within such employer necessary reasonably imposing hardship principal, without undue or interprets majority agent.” this section or three-pronged establishing a test of reasonableness: as covenant must be reasonable enforceable, time, to be conflicting geographical relation extent, approach parties. While this is con- interests of
225 sistent I with some of our recent do decisions,1 think that the test be broken down this fashion. can space a re- Time and are the dimensions which within operates; of a strictive the reasonableness judged limitation either dimension must terms be employer’s hardship need for and the of imposed covenanting employee. my on the main But point disagreement majority of concerns proper application formulation of but test, balancing to the facts case bar. Of course, conflicting employer employee may interests of compel the conclusion no nar- however restriction, rowly space, may limited in timе be reasonable particular agree, a case. I cannot that we however, today. such case confront a majority employer holds that an is entitled to compete only a benefits of covenant not to where,
during
period
employment,
of his
ac-
quires specialized training
gains
or
access
qualify
to methods оf
business which
as trade
agree
secrets.
there is no evidence
the record
specialized that Bello either received
or learned
of Girard’s
Girard,
confidential business
employed by
manager
methods. Bello was
Girard as the
of one of its consumer finance branch offices. In ad-
general
supervision,
dition to
office
com-
duties
prised making small loans to individual consumers—
especially
occupation,
requiring
not an
esoteric
or one
high
expertise.
a
level of technical
What
did
during
acquire
years
according
with Girard,
personal
before
the record
was
us,
number
valuable
both with
loan
contacts,
individual
customers, and,
importantly,
more
with merchants and rеtailers who,
-1
Bettinger
See, e.g.,
Assoc., Inc.,
v. Carl
Berke
455 Pa.
Hayes
(1974) ;
Altman,
v.
A.2d
438 Pa.
by referring particular their customers to finance com- panies, crucial source of loam business. importance of these contacts to the consumer testimony finance documented of- *6 parties. president fered that both testified Girard’s company rеquired the restrictive covenants from its “very employees personal type the because of of business tendency we’re a follow where borrowers have to in, manager a branch and also the sources of business, very well-spring get from often de- we our is business veloped way particular personal in a a between [sic] manаger. for a branch branch And it is not uncommon manager to move from one location to where another, company him.”2 within his own will follow customers many of his loan customers Bello himself testified that acquaint- of his friends and from the circle were drawn companies Explaining able loan were to ances. how compete rates, which offer lower interest with banks, manager matter whether the “It’s a he remarked: enough try In to make contacts. dealer is interested you get majority of the business that our you through your and have be contacts, merchant is go you get your aggressive and have to off butt and simple. And seek the business. It’s out only way you going to come to individual is through a referral.”3 merchant is hardly who, doubted that an be
It can position personal contacts, means of em- business from his amount of a substantial divert competitive just may present threat ployer serious a as employer’s specialist; highly corres- trained aas great. may just ponding be as On need non-specialist such as Bello coin, side the other hardship from a may suffer restrictive cov- less much 2 Record, 28a-29a.
3 Record, 108a-109a. enant than a trained technician the more since would, specialized a man’s the more limited be skills, job openings available to him in locality. See Re- statement, In I Contracts, comment e. §515, short, see in the nothing policy embodied in Restatement §516 to justify rеstricting covenants of non-competition to employees who have received advanced technical train- from ing their employers. Nor do think that our own cases support such a limitation.
As authority drawn limitation narrowly restrictive covenants between employer employee, the Court quotes Home Morgan’s Equipment Corр. v. 390 Pa. 136 A.2d Martucci, (1957) : reasons motivate the upholding “[Different of general covenants not to compete which ancillary to employment. An employe may receive specialized learn carefully guarded *7 methods of doing business which are the trade secrets of a particular enterprise. To prevent an employе from utilizing such and training information in compe tition with his former for the employer, patronage of the public at restrictive large, covenants are entered into. They are enforced the courts as reasonably necessary protection of the employer.” Supra at 223.
We glossed this passage Morgan v. Hayes 424 Pa. A.2d Altman, 225 670 a case in- (1967), a volving covenant of non-competition between two optometrists. There was no question Hayes that the defendant employee had received all the training to the necessary practice of optometry before he en- plaintiff’s the tered employ. The lower court had held the covenant unenforceable, relying on Re- Morgan. the we said: “It is not versing decree, necessary that an receive employee specialized and skills be- enforce a restrictive fore we will covenant. In the supra, page we said case, an Morgan employee specialized training not receive and that skills, specialized training аnd must receive be enforced. Gen- before restrictive covenant will compete, subject eral are therefore, covenants stringent to the test of reasonableness as to time and special training geographical receiving and area, just a considered and skills is fact must be controlling.” necessarily at Pa. 28-29. alone is (Emphasis original.) year, Jacobson &
Later that same we decided Co. Corp., v. International Environment Pa. A.2d 612 That case involved restrictive company engaged in sale of covenant between a ceilings, salesmen, and one of its radiant acoustical subsequently Kiley, established rival named who Kiley concern. The chancellоr found as a fact insight special training from no Jacobson or received but methods of nevertheless business, into its affirmed, of the covenant. We decreed enforcement saying: citing §516(f) “Under of the Restatement, must stand. The evidence test, above protection. Jacobson’s need makes clear heating business is one which the close radiant representative pro- personal of the sales contact appellee points buyers spective As is crucial success. years, number of to the builders, for a in his brief, out engineers in the area described architects Kiley & Both was Jacobson Co. covenant, limited proper space time limitations Jacobson’s (Emphasis original.) protection. . 427 Pa. 453. . .” *8 argument rejected explicitly such coven- We only where are enforceable receives ants employer, quoting pas- special from sage Hayes we which have recited above. from January,
Only
we decided another case
last
involv
employer:
a salesman and
ing
betwеen
a covenant
Berke
Bettinger
Assoc., Inc.,
Pa.
v. Carl
(1974). Bettinger
A.2d 296
had hired Berke as a sales
manager
temporary-help
Bettinger’s
in the
division of
subsequently
service. Berke
left Bettin-
ger’s employ
temporary-help
and established his own
compete.
violation of the covenant not to
Belying
upheld
supra,
enforcement of
Jacоbson,
we
saying:
“Berke
the crucial
covenant,
[admitted]
importance of customer
Bet-
contact
the business.
tinger
experience
also testified that
if
it was his
personal relationships
kept
close
were
with his custom-
they
part
their entire
ers,
would
most
turn
temporary-help needs
him.
it is
over to
reason-
Thus,
Bettinger
competition
able for
to seek
employees,
job
from former
like
whose sole
was
Berke,
prospective
to maintain the close affiliations
em-
with
ployers
temporary help.”
The burden was on
the unreasonable
ness of the covenant which he had entered into and
against
which Girard now seeks to enforce
him. Jacobson
Corp., supra,
&
v. Co.
International Environment
carry
Commonwealth v. Mouzon, Appellant. Argued January 21, 1974. Before Jones, C. J., and Man- Eagen, O’Brien, Roberts, Pomeroy, Nix JJ. DERINO,