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FIDELITY FUND v. JOSEPH DI SANTO AND SCHIFF TERHUNE INCORPORATED PA. APPEAL SCHIFF TERHUNE INCORPORATED PENNSYLVANIA (09/20/85)

filed: September 20, 1985.

FIDELITY FUND, INC.
v.
JOSEPH DI SANTO AND SCHIFF TERHUNE INCORPORATED OF PA. APPEAL OF SCHIFF TERHUNE INCORPORATED OF PENNSYLVANIA, APPELLANT. FIDELITY FUND, INC. V. JOSEPH DI SANTO AND SCHIFF TERHUNE INCORPORATED OF PENNA. APPEAL OF JOSEPH DI SANTO APPELLANT



Appeal from the Order Entered on December 15, 1982 in the Court of Common Pleas of Philadelphia County, Civil Division, No. 4965, March Term 1982

COUNSEL

Michael H. Egnal, Philadelphia, for appellee (at 132) and for appellant (at 133).

Walter W. Rabin, Philadelphia, for Fidelity, appellee.

McEwen, Tamilia and Cercone, JJ.

Author: Cercone

[ 347 Pa. Super. Page 115]

This is an appeal by defendants Joseph Di Santo and Schiff-Terhune Incorporated of Pennsylvania ("Di Santo", "Schiff-Terhune" or "defendants") from the denial by the lower court of their Exceptions to the lower court's Adjudication and the affirmance of the Decree Nisi as a Final Decree.*fn1 Specifically, defendants appeal from that part of the decree which orders defendants to account for all commissions received from insureds whose insurance needs were served by plaintiff through defendant Di Santo while he was employed by plaintiff and from that part of the decree which enjoins them, for two years, from soliciting the same insureds.

Di Santo also appeals from Conclusion of Law No. 7 set forth in the lower court's Adjudication which states that, "defendant Di Santo is entitled to no continuing share of commissions received by plaintiff after his resignation from plaintiff's employ, in insurance coverages sold by him during such employment."

Based on the reasoning which is set forth herein, we affirm in part and reverse in part and remand for further disposition consistent with this opinion.

[ 347 Pa. Super. Page 116]

The plaintiff, Fidelity Fund, Inc. ("Fidelity"), is in the insurance brokerage business. Defendant Joseph Di Santo was, for over 20 years, engaged in the insurance business as a broker or agent specializing in the production of large commercial accounts. During his working years, Di Santo developed a large number of contacts with commercial customers. In 1975, Di Santo sold his insurance agency and left the insurance business for a period of three years pursuant to a written non-compete agreement with the purchaser.

In July, 1978, plaintiff sought to expand its commercial insurance department. To facilitate this expansion, it hired Di Santo for the specific purpose of soliciting and obtaining commercial customers and to establish contacts with insurance companies through which to write the commercial policies. Di Santo was employed based upon an oral contract. There is no evidence or claim that the parties had agreed to an oral covenant not to compete. The plaintiff admitted that the employment contract made no provision as to whether, upon his termination of employment, Di Santo would forfeit commissions subsequently occurring and received by plaintiff on insurance coverages written by Di Santo during his employment.

Although Fidelity did not require or condition Di Santo's employment on his ability to persuade his previous clients to write insurance through Fidelity, a vice president of plaintiff testified that it was expected and hoped that Di Santo might do so. It is undisputed that Di Santo did in fact write some commercial insurance policies through Fidelity for clients he had developed prior to his employment there and for clients he subsequently developed independently of any information or leads imparted to him by Fidelity.

Upon termination of his employment with Fidelity, Di Santo began working for Schiff-Terhune Incorporated of Pennsylvania, a direct competitor of plaintiff. According to the findings of fact of the court below, in addition to employing Di Santo, Schiff-Terhune negotiated with him to purchase a list of customers for whom Di Santo had written

[ 347 Pa. Super. Page 117]

    policies while in plaintiff's employ. The lower court did not determine which of these customers had been serviced by defendant Di Santo prior to his employment with plaintiff, which he had developed by his own contacts while in the employ of plaintiff, or which were customers developed by leads given to Di Santo by the plaintiff. While still employed by plaintiff, defendant Di Santo wrote insurance policies designating himself or Schiff-Terhune, rather than the plaintiff, as broker.

The issues on appeal are (1) whether the trial court's order is overbroad based on its misconstruction of the law of trade secrets and its application to the facts of this case and (2) whether the lower court erred by holding that Di Santo was not entitled to continue receiving his share of commissions received by plaintiff on insurance coverages sold by Di Santo during his employment with plaintiff.

In entering a verdict and judgment for the plaintiffs, the court below based its opinion on several conclusions of law. The holdings which are relevant to this appeal are:

1. Defendant, Di Santo is entitled to no proprietary right to his relationship with his insurance customers previous to his employment with plaintiff, or in his knowledge of their insurance needs, such as to keep the coverages he sold them during that employment from becoming plaintiff's trade secrets.

2. Defendant Di Santo violated the terms of his employment by plaintiff in every instance of his procuring cancellation of insurance policies for which any insurer carried plaintiff as broker of record, and substituting for such cancelled policies other coverages as to which he had himself named broker of record.

3. Defendant Di Santo violated the terms of his employment by plaintiff in every instance of his placing coverage with any insurer, and having himself named broker of record, regardless of such insurer being one not ordinarily available to plaintiff.

4. Defendant Di Santo had no authority to endorse and appropriate for his own use insurance brokerage commission

[ 347 Pa. Super. Page 118]

    checks made payable to plaintiff, regardless of whether the insurer from whose coverage such commission derived was one ordinarily available to the plaintiff.

5. Defendant Di Santo was entitled to no greater share of commission deriving from coverage placed with an insurer not ordinarily available to plaintiff than of commission deriving from any other ...


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