Category: Business Law

Pennsylvania’s Dragonetti Act

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Although the cause of actions of abuse of process and wrongful use of civil proceedings may seem to be one in the same, there are significant differences between them. The common law cause of action for abuse of process is defined as the use of legal process against another “‘primarily to accomplish a purpose for which it is not designed.’” Rosen v. American Bank of Rolla, 627, 426 Pa. Super. 376, 627 A.2d 190, 192 (Pa. Super. 1993). Wrongful use of civil proceedings (or more commonly known as the “Dragonetti Act”) covers a different tort. Its provisions are:

  • Elements of action. A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
  • he acts in a grossly negligent manner or without probable cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and
  • the proceedings have terminated in favor of the person against whom they are brought.

42 Pa.C.S. § 8351 et. seq.

Under the Dragonetti Act, the parties liable include the lawyer, the law firm prosecuting the case, the law firm’s client, and if applicable, the owner of a corporate client. The Dragonetti Act, including its provisions that allows actions to be brought against lawyers who file suits or prolong proceedings in violation of the Act was recently found to be valid by the Pennsylvania Supreme Court. See Villani v. Seibert, 639 Pa. 58, 83, 159 A.3d 478, 492 (2017).

The difference between the Dragonetti Act and abuse of process causes of action are well known in Pennsylvania jurisprudence. An action for abuse of process differs from a Dragonetti action (i.e., abuse of process is that the gist of an action for the improper use of process after it has been issued, that is, a perversion of it. Malicious use of civil process has to do with the wrongful initiation of such process.” Rosen, supra., 627 A.2d at 192. When civil proceedings are filed or prosecuted with a malicious motive and lacking probable cause, 42 Pa.C.S.A. § 8351(a)(1)-(2) is violated. A successful cause of action under the Dragonetti Act has three elements: (1) the proceedings were decided in favor of the defendant; (2) the lawyer, the law firm, and the client caused those proceedings to be instituted against the defendant without probable cause; and 3) the proceedings were instituted primarily for an improper cause. See Di Loreto v. Costigan, 600 F. Supp. 2d 671 (E.D. Pa. 2009) (Discussing cases).

The Dragonetti Act provides that a plaintiff is entitled to recover for (1) the harm normally resulting from any dispossession or interference with the advantageous use of his land, chattels or other things, suffered by him during the course of the proceedings; (2) the expense, including any reasonable attorney’s fees, that he has reasonably incurred in defending himself against the proceedings; (3) any specific pecuniary loss that has resulted from the proceedings; and (4) punitive damages according to law in appropriate cases.

For more information, call Philadelphia business lawyers at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

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Unlimited Geographic Restriction in Non-Compete Agreements may be Void

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Non-compete agreements incident to an employment relationship are common place in Pennsylvania. Non-compete agreements prevent employees from working for competitors, but the restriction must be reasonable in both the duration and the geographic area. See Socko v. Mid-Atl. Sys. of CPA, Inc., 633 Pa. 555, 569, 126 A.3d 1266, 1274 (2015). Since some businesses stretch nationwide or even worldwide, some non-competes attempt to prevent an employee from working for any competitor anywhere. However, the geographic restriction should be determined by the employee’s duties or sales territory, not the employer’s overall market. See Boldt Machinery & Tools v. Wallace, 366 A.2d 902, 909 (Pa 1976).

Usually when an employer’s geographic restriction is too broad, the court will modify the restriction to better fit the employee’s duties or territory. Sidco Paper v. Aaron, 351 A.2d 250, 254 (Pa. 1976). Despite this, some over broad geographic restrictions may be determined to be void and will not be modified. Adhesives Research v. Newsom, No. 15-0326, 2015 WL 1638557 (M.D.Pa. April 13, 2015).

In Adhesives Research v. Newsom, the former employee’s sales territory included the western half of the United States, but the non-compete included a restriction anywhere employer’s products were sold worldwide. The Court refused to tailor the agreement to create a reasonable geographic location. The Court explained that when an employer utilizes an overly broad geographic restriction, although a specific geographic location could easily be determined based on the employee’s duties, the agreement should be found void with no modification.

For more information, call the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online. Our non-compete lawyers represent clients in Philadelphia.

Superior Court of Pennsylvania Upholds Employer’s Non-Compete Agreement That was Incidental to Employment and Reasonable in Time and Scope

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In Tyco Fire Products, L.P. v. Fuchs, the Superior Court of Pennsylvania held that Tyco Fire Products, L.P.’s (“Tyco”) non-compete agreement was enforceable against its former employee (“Fuchs”). 2017, WL 5509889 (Pa. Super. 2017). Tyco designs, manufactures, and distributes fire protection products such as chemical water and other fire preventative measures.  Fuchs worked as a senior sales manager for Tyco for approximately ten years. During his time at Tyco, Fuchs signed a Confidentially Agreement and a Non-Competition Agreement (the non-compete agreement). This non-compete agreement stated that Fuchs may not “employ, engage, or enter into employment” with any competing business in the Northeast (including 11 states) for a period of 12 months.  After his resignation in 2016, Fuchs began work at Reliable Automatic Sprinkler Company, Inc. which engages in the same type of business as Tyco. While employed at Reliable, Fuchs contacted former Tyco customers and engaged in business inside of the restricted zone of the non-compete.

When analyzing a non-compete agreement, the court will determine if the agreement is “incident to an employment relationship between the parties; the restrictions imposed by the covenant are reasonably necessary for the protection of the employer; and the restrictions imposed are reasonably limited in duration and geographic extent.”  Fuchs argued that Tyco’s non-compete agreement was unreasonably broad in both duration and geographic location.

The Court rejected Fuchs’ argument and found that the Tyco Agreement was enforceable under the required analysis. The Court ruled that the agreement was incidental to an employment relationship because of his actual employment as a sales manager for Tyco. Secondly, the Court ruled that Tyco’s agreement was reasonably necessary to protect Tyco’s legitimate business interests. In ruling on this issue, the Court looked to the fact that Reliable was in the same business as Tyco and Fuchs’ contact with the Tyco customers during his time at Reliable clearly show that there was a need to protect legitimate business interests. Lastly, and most importantly, the Court found that the 12-month (1 year) limitation was well within the reasonable limitations period and the 11-state geographic restriction was reasonable because Fuchs’ had conducted business in all restricted states during his time at Tyco. Thus, the Court ruled in favor of Tyco and affirmed the trial court’s decision.

Philadelphia non-compete lawyers at Sidkoff, Pincus & Green P.C. protect employees’ right to work. For assistance in any type of employment law matter, call 215-574-0600 to schedule a consultation in our Philadelphia office, where we represent clients in Pennsylvania and New Jersey, or contact us online.

Pennsylvania Superior Court Rules in Favor of Employee in a Covenant Not to Compete Case Because Company had no Protectable Business Interest in Information Available in the Public Domain

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In Wolfington Body Company, Inc. v. O’Neill, the Pennsylvania Superior Court found in favor of the employee, Defendant O’Neill, holding that the covenant not to compete, which Wolfington Body Company made O’Neill sign as a condition of his employment agreement, was unduly restrictive and overly broad. Wolfington Body Company, Inc. v. O’Neill, 2018 WL 2011398 (Pa. Super. 2018).

O’Neill began working for Wolfington Body Company in the fall of 2013 as a commercial vehicle sales person. Once hired, Wolfington required O’Neill to sign an Employment Agreement which contained several restrictive covenants including Non-Compete and Non-Solicitation Covenants. These covenants included language which restricted where O’Neill could work once he left Wolfington, and how long he must wait before working in the bus sales industry again. The covenant restricted O’Neill from working in any state which Wolfington is conducting or has conducted business. This restriction functionally prohibited O’Neill from working in the 35 states in which Wolfington has or had done business. In addition, the covenant not to compete prohibited O’Neill from working for two years in the bus sales industry after he left Wolfington. In the fall of 2016, O’Neill left Woflington and began working for another company in the bus sales industry. Wofington brought a suit alleging that O’Neill violated the restrictive covenants of his Employment Agreement, specifically that the O’Neill had access to Wolfington’s confidential, proprietary, or trade secretes which are legitimate business interests worthy of protection. O’Neill t testified that based on his long employment history in the bus sales industry, he had compiled information including a customer base, and price estimates for building busses.  However, O’Neill asserted that he returned all confidential information to Wolfington before ending his employment.

In analyzing whether to enforce a restrictive covenant, the Court looks to see if, “… it must be reasonably related to the protection of a legitimate business interest… including trade secretes or confidential information, unique or extraordinary skills, customer good will, and investments in an employee specialized training program. In contrast, a post-employment covenant that merely seeks to eliminate competition per se to give the employer an economic advantage is generally not enforceable.”  For a restrictive covenant to be enforceable, there must be the presence of a legitimate protectable business interest.  Once it is established that a legitimate protectable business interest is present, the court applies a balancing test weighing the employer’s protectable business interest against the employee’s interest in earning a living. Then the court balances the employer and employee interests against the interest of the public.

Here, the Court found that the information necessary to enable an experienced sales person to perform their job are readily available in the public domain, therefore the information retained by O’Neill was of no secret value or of any peculiar importance to Wolfington. Additionally, the definition of confidential information set forth in the employment agreement was overly broad and included any information that O’Neill may have learned while working for Wolfington thus, the restrictive covenant was not reasonably tailored to protect Wolfington’s business interests. For a restrictive covenant to be enforced there must be the existence of legitimate business interest, and the restrictive covenant must be reasonably tailored to protect the employer’s interests.  Wolfington failed to establish that the restrictive covenant was reasonably tailored, even if there were legitimate business interests at stake worth protecting. Since neither of these two necessary factors are present, the Court found in favor of O’Neill.

Philadelphia non-compete lawyers at Sidkoff, Pincus & Green P.C. protect employees’ right to work. For assistance in any type of employment law matter, call 215-574-0600 to schedule a consultation in our Philadelphia office, where we represent clients in Pennsylvania and New Jersey, or contact us online.

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PA Superior Court Analyzes Extent of Limited Immunity for Physicians under the MHPA

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On July 2, 2018 the Superior Court of Pennsylvania provided clarification to the extent of limited immunity provided to health care providers who treat mentally ill patients under the Mental Health Procedures Act (“MHPA”). Dean v. Bowling Green-Brandywine, 2018 PA Super 196 (Pa. Super. 2018). The MHPA was designed to provide limited civil and criminal immunity to “individuals and institutions providing treatment to the mentally ill.” Under the MHPA a physician providing treatment to a mentally ill person may only be found liable if they committed “gross negligence.” The claim against Bowling Green Brandywine Treatment Center (“Brandywine”) was brought by the parents of a patient who voluntarily admitted himself for treatment to deal with addiction to painkillers. Within ten days of being admitted the patient was found unresponsive on the floor of his room suffering from cardiac arrhythmia. After being transported to an emergency care facility the patient died. The parents’ medical experts opined that Brandywine committed gross negligence by failing to provide adequate care that would have made Brandywine aware that the patient was at considerable risk for cardiac arrest due to the medications in his system. The trial court held that all the doctors involved had limited immunity under the MHPA and granted a nonsuit against all defendants.

On appeal the parents argued that their son’s drug addiction was not dispositive by itself as to whether he suffered from mental illness, to which the court agreed. The court then went on to analyze whether care provided by Brandywine could be deemed to fall under the MHPA. The Superior Court found that for the first several days of treatment the patient was not classified as a mentally ill patient. However, two days prior to the patient’s death he had been seen for psychiatric care at Brandywine wherein a physician identified him as suffering from mood disorders and prescribed him medication. Consequently, even if the doctors were negligent by failing to identify the cardiac arrest risk, they were still protected by limited immunity as such error was not grossly negligent and the patient was deemed mentally ill.

For more information, call our Philadelphia business lawyers in Philadelphia and South Jersey at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or contact us online.

Eastern District of Pennsylvania Rules Against Plaintiff’s Tortious Interference in Prospective Contractual Relation Claim

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In UniStrip Technologies, LLC v. LifeScan, Inc. and LifeScan Scotland, Ltd. the Eastern District of Pennsylvania determined that Plaintiff had not met its burden of proof for its claim of tortious interference with prospective contractual relation. 153 F.Supp.3d 728 (E.D. Pa. 2015). The necessary elements of a cause of action for tortious interference with prospective contractual relations are as follows: (1) The existence of a prospective between the complainant and a third party; (2) purposeful action on the part of the defendant to harm the existing relation, or to prevent a prospective relation from occurring; (3) the absence of privilege or justification on the part of the defendant; and (4) the occasioning of actual damage as a result of defendant’s conduct.

The Court found that UniStrip failed to establish the first prong of this four-factor test. The first requirement of there being a prospective contractual relationship can be satisfied by demonstration of “something more than mere hope” that a contract will be formed. UniStrip was unable to convince the Court that there was a reasonable probability that a contract would arise.  UniStrip’s claim rested on the argument that it would have engaged in contractual relations with numerous buyers but for LifeScan’s contracts with them threatening to revoke rebates and discounts if they purchased UniStrip products. UniStrip argued that LifeScan’s conduct was without any business justification and caused significant financial harm by discouraging potential buyers from doing business with UniStrip. The Court held that UniStrip could not identify a “specific business relationships suffering as a result of defendant’s interference” and thus dismissed UniStrip’s claim.

For more information, call the Philadelphia business lawyers at The Law Office of Sidkoff, Pinus & Green, P.C. today at 215-574-0600 or contact us online.

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Supreme Court of Pennsylvania Severs Flat Deduction from the Pennsylvania Revenue Code

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In Nextel Commc’n of the Mid-Atl. Inc. v. Commonwealth, 171 A.3d 682 (Pa. 2017), the Supreme Court of Pennsylvania held that the Net-Loss-Carryover Provision (“NLC”) in the revenue code was prohibited as applied to corporate taxpayer by the Uniformity Clause but severing the $3 million dollar flat dedication from the provision was the appropriate consequence. In 2007, when the case began, the Pennsylvania Revenue Code provided that “a corporation could carry over losses as deductions equal to the greater of 12.5% of the corporations taxable income or $3 million. As a result, a business that had a net income less than $3 million was paying no corporate income tax while larger businesses were paying hefty corporate income taxes. Because the NLC was structured to assess a corporation’s tax liability on the basis of the value of a corporation’s taxable income, in operation, the NLC enabled the majority of corporations with taxable income (98.8% of eligible companies) to avoid paying any taxes at all in 2007.

The Court determined that the NLC was unconstitutional as written because of its inclusion of the $3 million flat deduction, the Court saw three available options: “(1) sever the flat $3 million deduction from the remainder of the NLC; (2) sever both the $3 million and 12.5% deduction caps and allow corporations to claim an unlimited net loss—the remedy chosen by the Commonwealth Court majority; or (3) strike down the entire NLC and, thus, disallow any net loss carryover.” Out of the three options available, the Court determined that severing the $3 million flat deduction from the NLC was the best option. Therefore, small corporations will not be able to deduct carried-forward operating losses from their taxable income.

For more information, please call our Philadelphia business lawyers at the Law Office of Sidkoff Pincus & Green at 215-574-0600 or contact us online.

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Pennsylvania Superior Court Rules Plaintiff Failed to Prove Special Harm Resulting From Defamatory Publication.

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The Superior Court of Pennsylvania denied a plaintiff’s claim for damages when he was unable to prove that the false statements caused actual injury. Shaffer v. Ambrosini, No. 653 WDA 2017, 2018 Pa. Super. (March 28, 2018). Pennsylvania law requires a plaintiff satisfy a seven-factor test to succeed in a defamation claim. This test includes: 1. The defamatory character of the communication; 2. Its publication by the defendant; 3. Its application to the plaintiff; 4. Understanding by the recipient of its defamatory meaning; 5. The understanding by the recipient of it as intended to be applied to the plaintiff; 6. Special harm resulting to the plaintiff from its publication; and 7. Abuse of a conditionally privileged occasion. In this matter, the plaintiff was unable to demonstrate any special harm resulting from the defamatory remark.

Under Pennsylvania law, “for purposes of a Pennsylvania defamation case, proof of actual injury to a private plaintiff’s reputation is a prerequisite to the recovery of damages for other actual injuries, including mental and emotional injuries.” Under this standard, the plaintiff must demonstrate how the statement harmed them, or how the statement “grievously fractured” their reputation in the community.  The court has been clear, it is not enough to be simply embarrassed or annoyed by these statements.

The plaintiff in this case was a part-time public defender who was originally suspended with pay following an incident at his workplace. Plaintiff was referred to an employee assistance program, but never enrolled in anger management courses. Once returning to work, plaintiff was involved in another incident. During the investigation regarding the second incident, the plaintiff’s employer stated that he believed plaintiff to be enrolled in anger management courses. Although this statement was false, the Court determined that the plaintiff had not suffered any harm that “grievously fractured” his standing in the community and affirmed the dismissal of his claim.

At the Law Offices of Sidkoff, Pincus & Green our experienced Philadelphia business lawyers handle many types of legal matters, including defamation claims.If you are interested in having a consultation with one of our Philadelphia business lawyers, please call us at 215-574-0600 or contact us online.

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Third Circuit Affirms Enforcement of Employer-Employee Arbitration Agreement

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On June 20, 2018, the United States Court of Appeals for the Third Circuit held than an arbitration agreement between an employer and employee was still enforceable regardless of whether the employee read the agreement. Ace Am. Ins. Co. v. Guerriero, 2018 WL 3057005 (3d Cir. 2018). In this case, the employee argued that the arbitration agreement was unenforceable because he never received the first two pages of his employer’s Employment Dispute Arbitration Policy. The Court ultimately found in favor of the employer and affirmed the lower court’s decision by finding that there was an agreement to arbitrate and that this dispute fell within the boundaries of that agreement.

Even considering the strong federal and state policies in favor of arbitration, the courts must find that there was a clear agreement between the parties with an intent to arbitrate. If there is an actual agreement to arbitrate, then the court will only find the agreement unenforceable if there is fraud or misconduct that would prevent mutual assent and failure to read the agreement is not a reason to find the agreement unenforceable. Here, the Third Circuit found that the agreement was enforceable because there was mutual assent and a lack of fraud that would excuse the employee from reading the agreement. The employee signed two separate documents showing his intent to arbitrate. Even if the employee’s assertion that he did not have the first two pages of the agreement was correct, the Court found this argument unpersuasive because the employee had access to the agreement through the employer’s website. The Court further stated that “even if there were any ambiguity or question over the scope of the Employment Dispute Arbitration Policy, we would apply the presumption in favor of arbitration.”

At the Law Offices of Sidkoff, Pincus & Green our experienced Philadelphia employment lawyers handle many types of legal matters, including arbitration agreements. If you are interested in having a consultation with one of our Philadelphia business lawyers, please call us at 215-574-0600 or contact us online.

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Pennsylvania Superior Court Upholds Non-Solicitation Agreement Despite Employees Change in Employment Status

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The Pennsylvania Superior court upheld non-solicitation agreements between an employer and employees after their employment agreements expired and the employees continued to work at-will. Metalico Pittsburgh, Inc. v. Newman, 160 A.3d 205 (Pa. Sup. Ct. 2017). Appellees Douglas Newman and Ray Medred (“Employees”) were employed by scrap metal company Metalico Pittsburgh, Inc. (“Employer”) from 2011 to 2015. The Employees signed a three-year employment agreement that included a non-solicitation agreement in part barring employment with any known affiliates or suppliers of the employer. After the three-year period, the Employees remained at the company at-will with some modifications to their jobs compared to the employment agreements. The Employees stayed with the Employer for one year before leaving to work for a competitor, and the Employer filed suit against the Employees and their new employer. The lower court found in favor of the Employees by finding that there was a lack of consideration for the non-solicitation considering there were material changes to the terms of the employment agreements when the Employees started working at-will.

The Superior Court reversed and held that there was adequate consideration and thus enforced the non-solicitation agreements in favor of the Employer. Under Pennsylvania law, there is adequate consideration when a restrictive covenant, such as a non-solicitation agreement, is signed at the beginning of an employment contract. Although the Employees argued that the non-solicitation agreement had expired when they changed to at-will status, this Court found that the explicit terms of the agreements contradicted this assertion. The non-solicitation agreements applied for the full term of the employment, regardless of whether it was under the contract or at-will. Moreover, the contract specifically stated that the non-solicitation provisions survived termination of the contract. The agreements also stated that consideration for the agreements was fulfilled by the payment of compensation and benefits to the Employees. Ultimately, the Superior Court found that the lower court erred and that the non-solicitation agreements were in effect when the Employees resigned and that the agreements were supported by consideration even though the employment agreements had expired, and the Employees were at-will.

For more information, call our employment lawyers in Philadelphia at the Law Office of Sidkoff, Pincus & Green at 215-574-0600 or submit an online inquiry.