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NAUS & NEWLYN v. ANDREW M. MASON AND ANDREW M. MASON ASSOCIATES (02/05/82)

filed: February 5, 1982.

NAUS & NEWLYN, INC.,
v.
ANDREW M. MASON AND ANDREW M. MASON ASSOCIATES, INC., APPELLANTS



NO. 158 OCTOBER TERM, 1979, Appeal from the Orders of the Court of Common Pleas of Chester County, at No. 181, 1978, Equity.

COUNSEL

Neil G. Epstein, Philadelphia, for appellants.

W. Richard Gentry, West Chester, for appellee.

Hester, Cavanaugh and Van der Voort, JJ.

Author: Per Curiam

[ 295 Pa. Super. Page 209]

Appellee Naus & Newlyn, Inc. (hereafter referred to as "N & N") is a management consulting firm, specializing in the field of cost reduction for business. Appellant Mason, a management consultant entered into discussions with N & N concerning possible employment with it. Mason accepted employment with N & N and signed an employment agreement dated one week after he commenced such employment. The employment contract contained a provision prohibiting Mason, after leaving N & N, from using "confidential information" and barring him from competing with N & N, for one year, in New York, New Jersey or Pennsylvania. Mason also was prohibited from soliciting or taking employment with N & N's clients, past or present.

Mason worked his way up the corporate ladder of N & N and eventually became president of the company. A Share Purchase Agreement was executed by Naus, founder of the company, who held all outstanding capital stock of the corporation; Mason purchased 4,000 shares of non-voting stock. The agreement restricted the transfer of the stock. The corporation subsequently elected to be taxed as a small business corporation; and recapitalized its structure for such purpose. Mason received 4,000 shares of common stock in

[ 295 Pa. Super. Page 210]

    exchange for his non-voting stock. The new stock certificate did not indicate that transfer of the stock was restricted.

Mason was terminated for reasons not pertinent to this appeal; he refused a redemption of his stock. Mason subsequently started his own management consulting firm, Mason Associates, Inc. (hereafter referred to as Associates) and hired several N & N employees. Mason contacted a number of companies which had been or were current clients of N & N. N & N filed a complaint in equity seeking to enjoin Mason and Associates from continuing correspondence with N & N's customers. The originally scheduled hearing was postponed at appellant's request. The parties entered into an Interim Order continuing the hearing and providing that appellants would be enjoined and restrained from contacting N & N's customers until the rescheduled hearing. After several days of testimony in an Order dated November 20, 1978, the court preliminarily enjoined and restrained appellants from submitting a bid to the Minnesota State Hospital System. N & N was required to post a bond as security. In a subsequent order of December 20, 1978, without further testimony, the court enjoined appellants from: soliciting the business of any of N & N's past or present customers until July 25, 1979; from disclosing or using, until that time, any confidential information or trade secrets acquired during Mason's or the Associates' employees tenure with N & N; and conveying, selling, encumbering or transferring N & N stock held by Mason. The court continued the bond. In a Supplemental Order, dated December 26, 1978, the court defined the term "customer".

Mason and Associates have appealed from these various orders. Appellants raise five issues. Due to our disposition of appellants' first contention, we need not address the remaining issues.

Appellants' first argument goes to the nature of the proceedings. They complain that the court in making definitive findings of fact and legal conclusions transformed what was supposed to be a preliminary injunction proceeding ...


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