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Alturnamats, Inc. v. Harry

September 16, 2008

ALTURNAMATS, INC., A PENNSYLVANIA CORPORATION, PLAINTIFF,
v.
GERALD HARRY, AN INDIVIDUAL, AND SIGNATURE FENCING AND FLOORING SYSTEMS, LLC (A/K/A SIGNATURE SYSTEMS, LLC) T/D/B/A DURADECK, A DELAWARE CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: McLAUGHLIN, Sean J., J.

MEMORANDUM OPINION

On December 6, 2007, Plaintiff Alturnamats, Inc. ("Alturnamats") filed a Motion for Temporary Restraining Order and/or Preliminary Injunction ("the Motion") seeking injunctive and other equitable relief against Defendants Gerald Harry ("Harry") and Signature Fencing and Flooring Systems, LLC ("Signature") for alleged misappropriation of trade secrets, breach of contract, breach of duty of loyalty, intentional interference with contractual relations and intentional interference with prospective economic advantages. An evidentiary hearing on the claims set forth in the Motion was held on March 5th, 6th, 7th and 10th, 2008. The parties subsequently agreed that, pursuant to Federal Rule of Civil Procedure 65(a)(2), the preliminary injunction hearing would be converted to a final hearing on the merits. The following constitute the Court's Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

A) Background

1. Alturnamats is a Pennsylvania corporation with its principal place of business at 701 East Spring Street, Building 63, Titusville, Venango County, Pennsylvania, 16354. (3/5/08 Hearing Transcript (hereinafter "3/5/08 H. T."), pp. 34-36). Alturnamats was founded in 1993 by Jim Aaron and his wife Janet Aaron. (3/6/08 H.T., p. 6).

2. Signature is a Delaware corporation with its principal place of business at 50 E 42nd St., Suite 501, New York, New York 10017. (3/5/08 H.T., p. 30). Signature sells a number of ground protection products including portable roadway systems, the latter being part of their product line since 2004. (3/7/08 H.T., p. 72).

3. Signature's President, Arnon Rosan, has been active in the sales of ground protection and modular flooring since 1993. (3/7/08 H.T., p. 72).

4. Gerald Harry is an adult individual residing at 21 Glenwood Drive, Oil City, Pennsylvania 16301 and is an employee or agent of Signature. (3/5/08 H.T., p. 30).

5. In June, 2006, Jim and Janet Aaron sold Alturnamats to current owners Paul and Vennie Gierlach and their son, Michael Gierlach. Michael Gierlach also serves as the President of Alturnamats. (3/5/08 H.T., p. 34).

6. Alturnamats is in the business of manufacturing and providing interlocking portable flooring systems and roadways for turf and landscaped area protection and to provide traction for vehicles operating in mud or sand. (3/5/08 H.T., p. 36).

7. Alturnamats primarily markets and sells its products to dealers and distributors who, in turn, sell the products to "end users." "End users" purchase the ground protection mats to use in the field, rather than to resell, and constitute a very small percentage of Alturnamats' customers. Alturnamats also sells to "original equipment manufacturers," or "OEMs." An OEM, typically a manufacturer of a piece of heavy equipment or machinery, purchase the portable ground protection systems to package and market in conjunction with their own machinery. An OEM is generally considered a dealer but is handled differently with respect to certain agreements and pricing. (3/5/08 H.T., pp. 45-46).

8. Alturnamats manufactures and sells the following products:

a. "AlturnaMATS" is a ground protection mat that features a maximum traction diamond plate tread design and is ideal for rugged application where maximum traction is desired. AlturnaMATS come in a variety of sizes generally 4' x 8' and 3' x 8' and generally in black and white colors.

b. "VersaMATS" is a ground protection mat that features a flat tread design on one side and the diamond plate tread design on the reverse side and is ideal for both pedestrian and vehicular traffic. VersaMATS come in a variety of sizes generally 4' x 8' and 3' x 8' and generally in black and white colors.

c. "Turn-A-Links" are either single or double links used to lock AlturnaMATS and VersaMATS together to form a continuous roadway, walkway, or working platform. Turn-A-Links come in either round links or flat links.

d. "Handi-Hooks" are tools that make moving the AlturnaMATS and VersaMATS easy, even in wet areas.

e. "Outrigger Pads" are lightweight 4-ply construction pads used to protect the ground from heavy equipment such as cranes.

f. "MAT-PAK" is a combined package consisting of twelve (12) AlturnaMATS or VersaMATS, twenty (20) Turn-A-Links, two (2) Handi-Hooks and a metal storage, skid rack. (3/5/08 H.T., pp. 38-43; See Plaintiff's Hrg. Ex. "1").

9. AlturnaMATS and VersaMATS have a variety of applications including, but not limited to, drilling, utilities, tree care/arborists, landscaping, construction, cemeteries, golf courses, manufactured housing, and the military. (3/5/08 H.T., p. 43).

B) Gerald Harry's employment at Alturnamats

Between 1993 and 1999, the Aarons built a customer base of approximately 40 dealers by frequenting trade shows, making cold call solicitations, and advertising in trade publications and other magazines. (3/6/08 H.T., p. 6-7).

11. Harry commenced his employment with Alturnamats on January 1, 2000. During his tenure, he held the position of National Sales Representative/Manager. (3/5/08 H.T., pp. 30 & 94). In this capacity, Harry had a myriad of duties including managing the sales of the company, dealer recruitment, dealer setup, end-user recruitment, end-user setup, account maintenance; development of dealer prices; development of tradeshow schedules, and customer service for the domestic United States. (3/5/08 H.T., pp. 94-96; 3/6/08 H.T., pp. 25-36).

12. Although Harry had no prior experience in the portable mat industry, Aaron hired him based on his prior sales experience and his previous work with a small family owned business. (3/6/08 H.T., p. 10).

13. Throughout Harry's employment, Alturnamats Management took steps to facilitate Harry's efforts to grow the business. As an initial matter, Aaron escorted Harry to trade shows, introduced him to customers, and generally tutored him as to the ins and outs of the business. (3/6/08 H.T., pp. 12-13). Harry was also given access to the Alturnamats' QuickBook program, a computer program from which Harry could run customer and sales reports, as well as access information about bidding and pricing structure and marketing plans. (3/5/08 H.T., pp. 104-08).

14. In addition, Harry was provided with daytimers and a laptop computer, with access to the Outlook program, in order for Harry to manage dealer and end-user contact information. (3/5/08 H.T., p. 104).

15. Finally, Harry was provided with dealer lists containing contact information that Harry placed inside his daytimers. (3/5/08 H.T., p. 106).

16. With Alturnamats' assistance, Harry "hit the ground running" and after one year of employment, Alturnamats had increased its number of dealers to 63. After Harry's second year of employment, that number rose to 84. (3/5/08 H.T., p. 98). By November, 2007, as a result of Harry's efforts and the support of Alturnamats management, the customer base had increased to approximately 170 dealers or OEMs. (3/5/08 H.T., pp. 46-47, 51).

17. Harry was well compensated by Alturnamats for his sales efforts as an incentive to continued good performance and as a disincentive for him to seek alternate employment. (3/6/08 H.T., pp. 36-38).

18. Subsequent to his acquisition of the company, Gierlach worked to develop an Employee Handbook for Alturnamats employees. On April 20, 2007, Harry signed an "Acknowledgment and Agreement" ("Acknowledgment and Agreement") acknowledging that he had reviewed and received the Alturnamats' Employee Handbook and agreed to the policies and confidentiality obligations contained therein. (3/5/08 H.T., pp. 30 & 72; See Plaintiffs Hrg. Ex. "13").

19. Specifically, Paragraph M of Section V of the Alturnamats' Employee Handbook provides as follows:

M. CONFIDENTIALITY

Information about the Company [defined as Alturnamats], . . .its Employees, customers, suppliers, and vendors is to be kept confidential and divulged only to individuals within the Company with both a need to receive and authorization to receive the information. If in doubt as to whether information should be divulged, err in favor of not divulging information and discuss the situation with your Supervisor.

All records and files maintained by the Company . . . are confidential and remain the property of the Company. . . . Records and files are not to be disclosed to any outside party without the express permission of the President of the Company. . . . Confidential information includes, but is in no way limited to: financial records, business, marketing, and strategic plans, personnel and payroll records regarding current and former Employees, the identity of, contact information for, and any other account information on customers, vendors, and suppliers, inventions, programs, trade secrets, formulas, techniques, and processes, and any other documents or information regarding the Company's operations, procedures, or practices. Confidential information may not be removed from Company premises without express authorization.

Confidential information obtained during or through employment with the Company may not be used by any Employee for the purpose of furthering current or future outside employment or activities or for obtaining personal gain or profit. The Company . . . reserve[s] the right to avail itself of all legal or equitable remedies to prevent impermissible use of confidential information or to recover damages incurred as a result of the impermissible use of confidential information.

(See Plaintiff's Hrg. Ex. "12," Bates Stamp p. 00023-34 (emphasis added)).

20. Sub-paragraph 3 of Paragraph D of Section VI of Alturnamats' Employee Handbook provides that the "Company's computer, voicemail, electronic mail (e-mail), or telephone systems and the data stored on them are and remain at all times the property of the Company." (See Plaintiff's Hrg. Ex. "12," Bates Stamp p. 00030).

21. Paragraph 8 of Section VIII of Alturnamats' Employee Handbook provides that if an employee decides to voluntarily leave employment, then "at least two weeks written notice" is required in order to "give [Alturnamats] the opportunity to make the necessary adjustments in its operations." An employee was also required "to return all property owned by the Company (e.g., vehicles, computers, keys, uniforms, identification badges, credit cards) prior to [the employee's] departure." (See Plaintiff's Hrg. Ex. "12," Bates Stamp p. 00041).

22. Alturnamats reserved the right to "change, delete, suspend or discontinue delete any part or parts of the policies in [the] Employee Handbook at any time without prior notice." (3/5/08 H.T., p. 226; See Plaintiff's Hrg. Ex. "12," Bates Stamp pp. 00006-00007).

23. The Employee Handbook included a disclaimer that "[t]he policies contained herein do not create any employment or personal contract, express or implied." (See Plaintiff's Hrg. Ex. "12," Bates Stamp pp. 00006). Gierlach testified, and we so find, that the Employee Handbook was not intended to create an employment contract. (3/5/08 H.T., p. 225).

C) Alturnamats' confidential information

24. The evidence reveals that Alturnamats made substantial efforts to maintain the secrecy and confidentiality of its customer list.

25. For instance, Alturnamats restricted access to customer lists and dealer information to employees within the company on a need-to-know basis. The information was stored on password protected computers which limited access to key employees. This information was primarily stored on two computer programs: the QuickBooks and Outlook programs. The information contained in Alturnamats' QuickBooks program was only accessible through a second username and password and then only on a "need to know" basis. (3/5/08 H.T., pp. 55-65).

26. Additionally, Alturnamats' dealers were also advised as to the sensitive, proprietary, and confidential nature of this information and agreed pursuant to contracts to keep such information confidential. Specifically, Paragraph 7 of ...


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