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August 2, 1973

Michael J. McNICHOL and John F. Scanlan, Inc.

Luongo, District Judge.

The opinion of the court was delivered by: LUONGO

Sur Motion For Preliminary Injunction

Luongo, District Judge.

 Plaintiff brought suit to enforce a restrictive covenant contained in an employment agreement with a former employee. The matter is before the court now on plaintiff's motion for preliminary injunction. Defendants are Michael J. McNichol, the former employee, and John F. Scanlan, Inc., McNichol's present employer. After hearing and upon pleadings and proof, the court makes the following


 1. Plaintiff, American Air Filter Company, Inc. (AAF), is a Delaware corporation having its principal place of business in Louisville, Kentucky.

 2. Defendant Michael J. McNichol (McNichol) is a citizen and resident of the Commonwealth of Pennsylvania.

 3. Defendant John F. Scanlan, Inc. (Scanlan) is a Pennsylvania corporation having its principal place of business in Philadelphia, Pennsylvania.

 4. AAF is engaged in the manufacture and sale of air cleaning, air moving and air conditioning equipment.

 5. AAF's Replacement Products Division manufactures and sells replacement filtering media used in equipment manufactured by AAF and by its competitors.

 6. Until about October 1970, AAF sold its replacement filters through independent agents and brokers on a commission basis. In about October 1970, AAF began to set up its own sales force to sell replacement filters in the greater Philadelphia area which consists of Eastern Pennsylvania, a portion of New Jersey and the state of Delaware.

 7. Defendant Scanlan has been in the air filtration business in the Philadelphia area since 1949. It sells and distributes both original air cleaning, air moving and air conditioning equipment and the replacement filtering media for such equipment.

 8. For a number of years Scanlan has been the largest seller (its sales constituting substantially more than 50%) in the Philadelphia area of original air filtration equipment.

 9. Scanlan has maintained records of all installations for which it has sold original air filtration equipment and of all installations for which it had lost out to a competitor on original equipment. Scanlan has had such information available to it as sources of replacement sales.

 10. Since the mid-1950's Scanlan has sold replacement filters produced by several manufacturers, including Cambridge Filter Corporation, a direct competitor of AAF in the manufacture of original air filtration equipment and replacement filters.

 11. AAF's Philadelphia office and Scanlan are in direct competition with each other.

 12. Scanlan employs 19 salesmen who sell both original air filtration equipment and replacement filters and two salesmen who sell replacement filters only.

 13. AAF hired its first salesman (George Franz) in the Philadelphia area in the early part of 1971. Two more salesmen were hired by AAF at the beginning of February 1972, McNichol being one of the two.

 14. On the day he entered his employment with AAF (February 1, 1972), McNichol signed a written employment agreement. The agreement contained the following paragraph:


"6. The EMPLOYEE agrees that for a period of two years after termination of its (sic) employment with AAF, the EMPLOYEE will not engage either on its (sic) own behalf or on behalf of any other person, firm, corporation or other entity, either directly or indirectly, in any competitive business located or carried on within the Territory above described or take any action whatsoever which may disturb existing business relations of AAF with any person, firm or corporation with whom the EMPLOYEE came in contact as a representative of AAF."

 15. The subject of a restrictive covenant had never been mentioned in any discussions between McNichol and AAF representatives prior to the time the employment agreement was presented to him for signature.

 16. Franz was not required to, and did not, sign an agreement containing a restrictive covenant such as that contained in paragraph 6 of McNichol's employment agreement.

 17. The "territory" referred to in paragraph 6 of the beforementioned employment agreement is described in paragraph 1 thereof as:


"1. 'Territory' means counties of Bucks, Berks, Montgomery, Phila., Lehigh, Schuylkill, Lackawanna, Northampton, Monroe, Carbon, Lucerne (sic), Wyoming, Susquehanna, Wayne, Pike, Bradford, Sullivan, Chester & Delaware-Pa.; New Castle, Kent, Sussex-Del.; Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Salem & Mercer-N.J. "

 18. McNichol was assigned to sell in that portion of the "territory" which included the counties of Montgomery, Berks, Lehigh, Schuylkill, Northampton, Carbon, Monroe, Luzerne, Pike, Wayne, Susquehanna, and Wyoming, and a part of the City of Philadelphia.

 19. McNichol had been employed as a salesman before going to work for AAF, but he had had no previous experience in the air filtration business.

 20. When he started working with AAF, McNichol was given sales literature, AAF catalogues and an IBM list of all AAF air filtration equipment installations in the Philadelphia area. The IBM list was marked confidential.

 21. A major part of the technical training given to AAF's salesmen was that given at training courses conducted at AAF's plant in Louisville, Kentucky.

 22. Shortly after he was hired, McNichol was invited to attend such a training course, but he was unable to do so because of personal reasons.

 23. Almost immediately after he was hired, McNichol started making sales calls. AAF's Eastern sales manager (Robert Reddy) accompanied McNichol on about 20 such calls over a span of four or five days. Following each call, the sales manager would offer a critique and make suggestions for improving the sales presentation.

 24. In addition to the calls on which he was accompanied by the sales manager, McNichol was accompanied on calls for three or four days by other AAF salesmen, primarily George Franz.

 25. While in AAF's employ, McNichol became familiar with AAF's policies for granting discounts when competitive prices for replacement filters had to be quoted. Such information is regarded by AAF as confidential.

 26. Weekly sales staff meetings were held at AAF's Philadelphia office. In such meetings, potential customers for replacement filters were discussed. McNichol attended several such meetings and was thus exposed to information concerning potential customers for replacement filters.

 27. McNichol attended two sessions sponsored by AAF at which there was discussion of technical aspects of selling replacement filters.

 28. McNichol did not get as much training as is normally given by AAF to its salesmen. As a result of his association with AAF, however, McNichol did gain some knowledge of the business of selling replacement air filters.

 29. Very little, if any, of the information learned by McNichol during his employment with AAF constituted trade secrets.

 30. Notwithstanding the terms of paragraph 6 of his employment agreement with AAF, on January 19, 1973, McNichol resigned from his sales position with AAF and went to work for AAF's competitor, Scanlan, at a higher salary.

 31. Scanlan did not actively induce or persuade McNichol to terminate his employment with AAF.

 32. No employee of Scanlan had knowledge of the restrictive covenant in McNichol's employment agreement with AAF until AAF's attorney informed Scanlan of the covenant on April 10, 1973.

 33. McNichol performed essentially the same sales functions for Scanlan as he had performed for AAF.

 34. AAF did not hire a salesman to replace McNichol until approximately two months after McNichol left. 35. While McNichol was with AAF, gross sales of replacement filters in his territory were: 1972 April $ 6,500 May 2,700 June 8,200 July 6,900 August 13,300 September 7,200 October 5,800 November 6,400 December 10,700


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