Superior Court of Pennsylvania Upholds Non-Solicitation Agreement, Awards $6.9 Million in Damages
On October 7, 2016 the Superior Court of Pennsylvania handed down a ruling upholding the legality of non-solicitation agreements and awarded millions of dollars in damages. In B.G. Balmer & Co. Inc. v. Frank Crystal & Company Inc., et al, 2016 PA Super 202 (Pa. Super. 2016). Plaintiff Balmer sued to former employees as well as their new employer, Frank Crystal. The former employees began planning to work for Frank Crystal six months prior to leaving Balmer. Although they had signed non-solicitation agreements with Balmer, the defendant employees worked with a recruiter during this time and gave up valuable information about Balmer, such as trade secrets and client lists. During their first year at Frank Crystal, the defendant employees generated revenue solely on former Balmer clients, and managed to bring Balmer’s largest client over to Frank Crystal. As a result of the defendant employees’ actions, Balmer lost its client base and had to be sold.
Balmer sued the former employees and Frank Crystal, alleging violation of their non-solicitation agreements, breach of fiduciary duty, tortious interference with contractual relations, unfair competition and other claims. The trial court ruled in Balmer’s favor for a majority of the claims, assessing $2.4 million in compensatory damages and $4.5 million in punitive damages. Defendants appealed the award of punitive damages, but the Pennsylvania Superior Court affirmed the lower court’s ruling and found their conduct egregious enough to warrant a large award.