The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER OF COURT
Now pending before the Court is a MOTION FOR PRELIMINARY INJUNCTION (Document No. 4) filed by Plaintiff Zambelli Fireworks Manufacturing Co., Inc. ("Zambelli") against a former employee, Matthew Wood, and a competitor, Pyrotecnico F/X, LLC ("Pyrotecnico") to enforce the restrictive covenants in an Employment Agreement executed between Zambelli and Wood.
On August 25-27, 2008, the Court conducted an evidentiary hearing on Plaintiff's motion. Zambelli presented as witnesses Dr. George Zambelli, Jr., current chairman of the Board of Directors and owner of 50% of the stock of Zambelli; Ernest Simmons, a long-time Zambelli pyrotechnician in its Florida office; and Douglas Taylor, current chief executive officer ("CEO") of Zambelli. Pyrotecnico called as a witness Stephen Vitale, president and managing member of the Pyrotecnico group of companies. Wood testified on his own behalf. The testimony of two witnesses, Marcia Ann Zambelli Fumagali, and Danabeth Zambelli Trasatti,*fn1 was submitted by deposition. The parties have submitted post-hearing Proposed Findings of Fact and Conclusions of Law (Document Nos. 49, 50) and responses thereto, all of which filings were complete as of November 12, 2008. The request for injunctive relief is therefore ripe for disposition.
The Court issues the following Findings of Fact and Conclusions of Law in accordance with Fed. R. Civ. P. 52 and 65.
A. The Companies and Industry
1. Zambelli is in the business of selling, staging and performing fireworks displays and is one of the oldest and largest fireworks companies in the United States. Zambelli currently does business in approximately 40 states, but regards its market as nationwide, if not international. Until his death in 2003, George Zambelli, Sr. was the majority shareholder, CEO, and essentially ran the company. After his death, his daughters Marcy and Danabeth assumed primary responsibility for day-to-day operations. Although corporate titles were not relegated much importance within the organization, Marcy was named the Chief Executive Officer and Danabeth became the President. George Zambelli, Jr., was and is primarily employed as an opthalmologist, but he is also active in the fireworks business with special projects, documentaries, and during the July 4th busy season.
2. Defendant Pyrotecnico has also been in the fireworks display business for decades. Defendant Pyrotecnico is comprised of several related companies, all of which are managed by Stephen Vitale. While Matthew Wood is employed by Pyrotecnico F/X, LLC, he has performed work for several of the Pyrotecnico entities.
3. The fireworks industry in the United States is quite competitive. The industry has at least five "large" entities, including Zambelli and Pyrotecnico, defined as those with annual revenues in excess of $5 million.
4. Both Zambelli and Pyrotecnico have their main offices in New Castle, Pennsylvania. Employees of both companies regularly see one another, socialize together, and many are friends. Pyrotecnico has lost employees to Zambelli, and has had employees come to it from Zambelli. Indeed, a member of the Zambelli family, Lou Zambelli, an uncle to George Zambelli, Jr., went from Zambelli to Pyrotecnico, and back to Zambelli over the years. Pyrotecnico has never pursued Zambelli employees while they were actively employed there.
5. Each company has offices in other states. Matthew Wood worked in Zambelli's Florida office. Both Zambelli and Pyrotecnico have lured customers from one another in the course of competition, and both have lost customers to other competitors.
6. The fireworks or pyrotechnics industry operates by obtaining materials, that is, the fireworks shells, almost exclusively from China; finding customers and selling shows; and successfully executing the shows.
7. To carry out their business, both companies use persons in specific categories of jobs relevant to this dispute. A show designer, also known as a choreographer, performs the artistic act of combining the fireworks display with music. A "shooter," or pyrotechnician, is a field person who executes the fireworks display on-site.
8. Choreography is typically accomplished through the use of computer software programs which are available in the public domain. The program used by Zambelli is called Fire One. Pyrotecnico uses a program called Pyrodigital. These programs are purchased and used off-the-shelf, and are available to the general public. They are not owned by the customer, and cannot be modified for a particular purchaser. When choreographing a fireworks display, the actual geographic location of the show is virtually immaterial, because the show is designed on a personal computer.
B. Matthew Wood's Education and Work History
9. Matthew Wood is a thirty-one year-old pyrotechnics designer/choreographer.
10. Wood's father, a pyrotechnic hobbyist and technician, introduced him to pyrotechnics at a young age.
11. Knowing that he wanted to pursue a career in the pyrotechnics industry, Wood obtained an associate's degree in technical theatre from Vincennes University and a bachelor's degree in theater from Indiana State University.
12. In his employment positions prior to working for Zambelli, Wood gained experience in various aspects of the pyrotechnics field including: sales, agreements, design work, effects, and pyrodigital software. Wood had experience with stage pyrotechnics and had made some home fireworks, but had little experience in aerial fireworks displays on the scale of Zambelli's major shows.
13. Wood was personally interviewed for employment by George Zambelli, Sr. in 2001.
14. In preparation for his interview with Mr. Zambelli, Wood downloaded a demonstration copy of the Fire One software program and began to familiarize himself with that program.
15. George Zambelli, Sr. hired Wood specifically to assist Marcy and Danabeth, who ran the Florida office. Wood's initial duties involved work on new and existing accounts (outdoor and indoor displays), calling on customers, applying for permits, reviewing the fireworks sites, attending trade conferences, and whatever else was asked of him. Wood's responsibilities expanded over time.
16. Zambelli provided Wood with valuable training throughout his employment. In particular, Ernie Simmons taught Wood how to efficiently lay out and choreograph shows and provided instruction on the Zambelli setup and systems. Wood also gained hands-on experience as a helper in actually shooting aerial fireworks displays. In 2007, Zambelli paid for Wood to become a certified trainer for the Pyrotechnic Guild International ("PGI"). During his employment at Zambelli, Wood also became licensed in Colorado and New York.
17. Wood worked very closely "hand in hand" with Marcy and Danabeth in various aspects of the business and would do virtually anything that the sisters asked him to do.
18. As Wood became more experienced, he became responsible for preparing business proposals which involved pricing information and contracts, site evaluation, choreography, obtaining permits, and calling on Zambelli's customers.
19. During his employment by Zambelli, Wood acquired and developed unique skills that are very specific to the pyrotechnic industry. Zambelli promoted Wood as one of its premier choreographers and Wood designed some of Zambelli's highest-profile shows, including the New York City Times Square New Year's Eve show, the Aquatennial show in Minneapolis, Sky Blast in Pittsburgh, and Gasparilla in Florida.
20. While he was employed with Zambelli, Wood conducted sales but was not assigned a specific territory. Wood had extensive communications with clients and he would interact with them in preparation for their shows and follow-up afterwards.
21. Wood had interaction with the following clients during the course of his employment with Zambelli: Colorado Rockies (Tucson, AZ and Denver, CO); Exquisite Event Planning, Trabuco, CA; Soboba Casino, San Jacinto, CA; City of Alhambra, CA; Knott's Berry Farm, Buena Vista, CA; City of Huntington Beach, CA; County of Los Angeles, Marina Del Rey, CA; Channel Island Harbor Foundation, Oxnard, CA; United States Marine Corps, Twenty-Nine Palms, CA; MTV My Sweet 16 Party, Long Beach, CA; The Monte Fund Show, Aptos, CA; The Queen Mary, Long Beach, CA; Presidential Inauguration, Washington, D.C.; Gasparilla Festival, Tampa, FL; Hard Rock Hotel and Casino, Hollywood, FL; SunFest of Palm Beach County, West Palm Beach, FL; Orange Bowl, Miami, FL; Turner Field, Atlanta, GA; Inner Harbor, Baltimore, MD; Macy's, Southfield, MI; Aquatennial Festival, Minneapolis, MN; Avi Hotel & Casino, Laughlin, NV; Nellis Air Force Base, North Las Vegas, NV; Seneca Casino, Salamanca and Niagara, NY; Times Square, New York, NY; Kiowa Casino, Devol, OK; Wildhorse Resort and Casino, Pendleton, OR; Sunoco Sweet Sounds of Liberty Concert and Fireworks/Welcome America, Philadelphia, PA; Mt. Rushmore, S.D.; Minor League Baseball Trade Show, TN.
C. The Employment Agreements
22. Upon being hired by George Zambelli, Sr. in 2001, Wood signed an employment agreement which contained a twenty-four month non-competition provision (the "2001 Agreement").
23. The 2001 Agreement contained an arbitration provision which required that any action to enforce the agreement be conducted through private arbitration.
24. As the employment relationship between Wood and the Zambelli family continued and developed, the family considered Wood to be the "next generation" and "future of the company." However, Wood was never offered an opportunity to own stock in Zambelli.
25. The 2001 Agreement was "superseded" by another employment agreement that Wood signed on June 2, 2005 (the "2005 Agreement").
26. George Zambelli, Jr. testified that a primary reason why Wood was requested to sign the 2005 Agreement was to bind Wood to the company through the next generation.
27. The 2005 Agreement contained, inter alia, the following additional restrictions:
(a) A provision purporting to prohibit Wood from engaging "in any manner" in the pyrotechnic business within the Continental United States or taking a position of employment with a company engaged in the pyrotechnic business for two years after leaving the company.
(b) A two-year non-solicitation provision.
(c) A confidentiality provision preventing disclosure of trade secrets and materials.
(d) A provision that Wood provide Zambelli with three-months notice of resignation.
(e) A provision stating that consideration consisted "of the mutual covenants and agreements set forth following and intending to be legally bound...."
(f) A provision specifically stating that if a Court should determine that the terms of the non-compete agreement are unreasonable, the remedy shall be modification of the Agreement to less restrictive terms rather than voiding the Agreement.
(g) A provision requiring Wood to pay all legal fees, court costs and expenses incurred by Zambelli if Zambelli prevails in legal proceedings to enforce the Agreement. (Pyrotecnico has agreed to reimburse Wood for any such legal expenses.)
(h) A provision stating that Pennsylvania law shall apply. There is no arbitration provision.
28. The 2005 Agreement was entitled "Employment Agreement for New Employee" and stated that the consideration for the Agreement was the offer of employment, even though Wood had been employed there for several years by that time in 2005. Wood specifically spoke to Danabeth and raised the fact that the Agreement reflected "New Employee" but she downplayed it and told Wood not to worry and that everything was fine.
29. This exchange between Wood and Danabeth illustrates the lack of business formalities with which the Zambelli daughters operated the corporation and the close working relationship and trust that existed between the Zambelli daughters and Wood.
30. Wood's compensation increased every year while he was employed at Zambelli.
31. As alleged consideration for signing the new employment agreement, Wood's base salary increased from $1,571.81 to $2,115.39 per pay period, an increase of 34.5%.
32. When Wood signed the 2005 Agreement, there was a potentiality that he would earn less in "shooter fees" than he had earned in prior years by going to shows and actually shooting the fireworks. Marcy and Danabeth told Wood that he would be spending more time in the office and that he would have less time to actually shoot shows, and that he would have to request permission to engage in shooting. The increase in salary which Wood received contemporaneous with the 2005 employment agreement was the figure requested by Wood based on his calculation of what he would need to earn without the availability of shooter fees. The shooter fees that Wood earned for the 2005 July 4th shows were already planned and were not part of the June 2005 arrangement.
33. The difference between what Wood was guaranteed to make in 2005 ($55,000) and what he actually earned in 2004 ($52,997) was $2,003. With "shooting" income included, Wood actually earned $62,307 in 2005, an increase of approximately $9,300 over his 2004 income.
34. No Zambelli witness with first-hand knowledge could identify any new duties or responsibilities or authority assigned to Wood after entering into the 2005 Agreement; rather, he continued to perform his same duties and functions and was expected to "continue to progress" in them. In actuality, new duties and increased access to Zambelli's pricing information by Wood did not come with the 2005 Agreement, but instead occurred in 2007 following a corporate restructuring.
35. Marcy and Danabeth were the persons involved on behalf of Zambelli in having Wood sign the 2005 Agreement. Both sisters testified that the 2005 Agreement was presented to Wood because he wanted and/or was getting a raise in base pay to offset ...