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Meyer-Chatfield v. Century Business Servicing

August 12, 2010


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



Before the Court is the Motion for Partial Summary Judgment Pursuant to Fed. Rule Civ. P. 56 filed by Defendants Century Business Services, Inc. ("CBIZ"), Benmark, Inc. ("Benmark"), and Lon C. Haines ("Haines"). Plaintiff Meyer-Chatfield Corporation commenced this action on July 14, 2005 against CBIZ, Benmark, Haines, Thomas Kosanda ("Kosanda"), Larry L. Linenschmidt ("Linenschmidt"), and Dana C. Hayes ("Hayes"). (Doc. No. 1, Pl. Compl. (hereinafter "Pl. Compl.")) Plaintiff has settled with Kosanda, Linenschmidt and Hayes, and CBIZ, Benmark, and Haines remain as Defendants. In the remaining claims set forth in the Complaint, Plaintiff alleges Breach of Contract, Interference with Contracts, and Civil Conspiracy. (Id.) Plaintiff also requests an Injunction. (Id.) These claims arise from allegations that CBIZ, Benmark, and Haines solicited Agents and Strategic Partners from Plaintiff in breach of various contracts with Plaintiff. (Id.) The case is before this Court based on diversity of citizenship jurisdiction. Therefore, Pennsylvania state law applies as specified in the contracts of the parties.


On May 20, 2010, Defendants filed the instant Motion for Partial Summary Judgment (Doc. No. 181), seeking a determination from the Court on the meaning of solicitation, the validity of a liquidated damages clause, and the admissibility of the damages calculation of Plaintiff's expert. On May 27, 2010, Plaintiff filed a Memorandum in Opposition to Defendants' Motion for Partial Summary Judgment (Doc. No. 183), and a Response to Defendants' Statement of Purportedly Undisputed Facts (Doc. No. 184). On June 3, 2010, Defendants filed a Reply to Plaintiff's Response (Doc. No. 186). On June 24, 2010, Plaintiff filed a Sur-Reply Memorandum in Opposition to Defendants' Motion for Partial Summary Judgment (Doc. No. 205). A hearing was held on the Motion on July 2, 2010. At the hearing the parties were given leave to file additional briefs. On July 23, 2010, Defendants filed a Memorandum in Support of their Motion (Doc. No. 223), and Plaintiff filed a Supplemental Memorandum in Opposition to the Motion (Doc. No. 224). Now that briefing on all issues is concluded,*fn1 the Court will proceed with its disposition of the pending motions.


Plaintiff provides various business services to its clients, including the sale of Bank Owned Life Insurance ("BOLI"), through its agents and strategic partners. (Pl. Compl., at ¶¶ 3, 11). Benmark is engaged in the same business as Plaintiff, competes directly against Plaintiff, and also sells BOLI. (Id. at ¶¶ 5, 21). Benmark is a wholly owned subsidiary of CBIZ. (Id. at ¶ 5).

Defendant Haines worked for Plaintiff as its Vice-President of Sales and Marketing, but left Plaintiff in March 29, 2004 to work for CBIZ. (Doc. No. 181, Ex. A, Att. #1 at 1 (hereinafter "Haines Empl. Agree.")); (Doc. No. 181, Ex. A, Att. #2 at 1 (hereinafter "Haines Sep. Agree.")).

As a condition of Haines' employment agreement with Plaintiff, Haines agreed not to compete with Plaintiff for a period of four years after leaving the company. (Haines Empl. Agree. at 9-10). When Haines left Plaintiff for CBIZ, Plaintiff and Haines agreed to replace Haines' non-compete clause with a nonsolicitation agreement that would allow Haines to work for CBIZ, but would restrict Haines from soliciting any employees or customers of Plaintiff. (Haines Sep. Agree.). The nonsolicitation clause required Haines to "not directly or indirectly (i) solicit any of Plaintiff's employees, agents, representatives, strategic partnerships, [or] affiliations." (Id. at 1). The agreement further provided for liquidated damages of "(ii) a fee of $50,000 for each employee, agent, or representative recruited away from Plaintiff; (iii) $250,000 for each strategic partner solicited." (Id. at 2). As defined by the parties, an "Agent" is "a person who is licensed to sell insurance in the state of sale and is appointed by the insurance carrier to sell the insurance contract" and a "Strategic Partner" is "an organization that typically works with the banking community and has demonstrated an interest in working with Plaintiff or vice versa." (Doc. No. 181, Ex. A, Att. #3 at 2).

In Spring 2004, Benmark approached Plaintiff and expressed an interest in acquiring Plaintiff. (Pl. Compl. at ¶ 38). On June 4, 2004, prior to Benmark performing its due diligence for the potential acquisition, the two parties agreed to multiple Confidentiality Agreements. (Id. at ¶ 39). On September 29, 2004, the two parties agreed to an additional Nonsolicitation Agreement. (Id.) The Nonsolicitation Agreement required Benmark to "not solicit any personnel of [Plaintiff] to become personnel of [Benmark] or any affiliate of [Benmark]." (Doc. No. 181, Ex. A, Att. #8 at 3 (hereinafter "Benmark Nonsolicitation")). The agreement with Benmark did not include a liquidated damages clause. (Id.)

Acquisition discussions between Benmark and Plaintiff broke down and Benmark never acquired Plaintiff. (Doc. No. 181, Def. Mem. Supp. Mot. Sum. J., at 4 (hereinafter "Def. Mem.")). On February 9, 2005, Agent Thomas Kosanda was fired for cause from Plaintiff. (Doc. No. 183, Pl. Mem. Opp. Def. Mot., at 4 (hereinafter "Pl. Mem.")). In March 2005, Kosanda and his sales team, which consisted of Larry Linenschmidt and Dana Hayes (collectively "Kosanda Team"), were hired by Benmark. (Pl. Compl. at ¶¶ 26, 30, 35). Strategic Partners Thomas Brothers ("Thomas Brothers"), Ben Shapiro ("Shapiro"), William Lynch ("Lynch"), and America's Community Bankers ("ACB") terminated their business relationship with Plaintiff as well. (Pl. Mem., at 14).

In their Complaint, Plaintiff alleges Benmark, CBIZ, and Haines breached their respective Nonsolicitation Agreements by soliciting the Agents and Strategic Partners. (Pl. Compl. at ¶¶ 54, 58, 62, 66, 70). The Thomas Brothers and Lynch were working with Plaintiff as strategic partners on an important sale -- the Mercantile BOLI Transaction ("BOLI Transaction") -- when they terminated their relationship. (Doc. No. 181, Att. #2, State. Undisp. Facts, at ¶ 22 (hereinafter "Def. State.")). Plaintiff's expert estimates the damages to Plaintiff from the loss of this BOLI Transaction was $441,925. (Doc. No. 181, Ex. G at 6-8 (hereinafter "Expert Report")). Plaintiff's expert estimates damages to Plaintiff caused by the solicitation of the Kosanda Team at either $4,035,380, based on the assumption the Kosanda Team would have stayed with Plaintiff for three additional years, or $5,837,197, based on the assumption the Kosanda Team would have stayed with Plaintiff for five additional years. (Id. at 3). Plaintiff claims only liquidated damages for the alleged solicitation of Shapiro and ACB. (Id.)


Granting summary judgment is an extraordinary remedy. Summary judgment is only appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Bouriez v. Carnegie Mellon Univ., 585 F.3d 765, 770 (3d Cir. 2009). An issue is genuine only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party, and a factual dispute is material only if it might affect the outcome of the suit under governing law. Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The Court's task is not to resolve disputed issues of fact, but to determine whether there exist any factual issues to be tried. Liberty Lobby, 477 U.S. at 247-49.

In ruling on a motion for summary judgment, the Court must view the evidence, and make all reasonable inferences from the evidence, in the light most favorable to the nonmoving party. Chambers v. School Dist. of Philadelphia Bd. of Educ., 587 F.3d 176, 181 (3d Cir. 2009); Bouriez, 585 F.3d at 770. Whenever a factual issue arises which cannot be resolved without a credibility determination, at this stage the Court must credit the nonmoving party's evidence over that presented by the moving party. Liberty Lobby, 477 U.S. at 255.


Defendants request partial summary judgment on three issues. First, they wish to exclude certain definitions of "solicitation" because they contend its ordinary meaning is clear and unambiguous. Second, Defendants ask the Court to hold that Plaintiff cannot collect liquidated damages because actual damages are calculable and allowing liquidated damages will amount to a double recovery. Lastly, Defendants contend that the expert's damages calculation in regard to Kosanda is not admissible because the length of time Kosanda would have stayed with Plaintiff had he not been fired is highly speculative. For the reasons discussed below, the ...

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