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Zambelli Fireworks Manufacturing Co., Inc. v. Wood

November 9, 2010

ZAMBELLI FIREWORKS MANUFACTURING CO., INC. DOING BUSINESS AS ZAMBELLI FIREWORKS INTERNATIONALE, PLAINTIFF,
v.
MATTHEW WOOD, DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

Now pending before the Court are cross-motions for summary judgment:

PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT REQUESTING ATTORNEYS' FEES AND COSTS (Document No. 76) filed by Zambelli Fireworks Manufacturing Co., Inc. ("Zambelli"); and DEFENDANT MATTHEW WOOD'S MOTION FOR SUMMARY JUDGMENT (Document No. 81). The motions have been thoroughly briefed. The parties have developed their positions regarding the "Concise Statements of Material Facts" and have submitted numerous exhibits for consideration by the Court. Accordingly, the motions are ripe for disposition.

Factual and Procedural Background

Zambelli filed this lawsuit in March 2008 against a former employee, Matthew Wood, and a competitor in the fireworks industry, Pyrotecnico F/X, LLC ("Pyrotecnico") to enforce the restrictive covenants in an Employment Agreement executed between Zambelli and Wood. After a period of discovery, the Court conducted an evidentiary hearing in August 2008 on Plaintiff's motion for a preliminary injunction. The parties filed post-hearing briefs and proposed findings of fact and conclusions of law. On January 21, 2009, the Court issued Findings of Fact and Conclusions of Law in accordance with Fed. R. Civ. P. 52 and 65, which granted Zambelli's motion for a preliminary injunction in part.

Among other factual determinations, the Court found that the fireworks industry is competitive and that both Zambelli and Pyrotecnico have lured customers from one another in the course of competition, and both have lost customers to other competitors. The operative employment agreement was executed on June 2, 2005 (the "2005 Employment Agreement"). The 2005 Employment Agreement contained, inter alia, the following provisions:

(a) A non-competition 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 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.

(e) An attorneys fees provision which states: "If it is necessary for Zambelli to file legal proceedings to enforce the terms of this Agreement and Zambelli prevails, Matthew Wood agrees to pay all legal fees, court costs and expenses incurred by Zambelli in such proceedings."

(f) A provision stating that Pennsylvania law shall apply.

The Court determined that the 2005 Employment Agreement between Zambelli and Matthew Wood is enforceable and that Wood had breached the terms of the Employment Agreement by accepting an employment offer at Pyrotecnico. On the other hand, the Court explained that Wood is entitled to earn a livelihood in the pyrotechnic field and held that he was entitled to resign from his job at Zambelli and to accept employment at Pyrotecnico. The Court concluded that the non-compete provisions were overbroad, and commented: "The mere fact that Wood could work on shows for Pyrotecnico customers does not directly harm Zambelli."

As to the other claims asserted by Zambelli, the Court stated: "Based on the testimony and evidence thus far presented, the Court observes that Plaintiff is unlikely to succeed on the merits of its claims for breach of fiduciary duty of loyalty, misappropriation of trade secrets, interference with contractual relations or prospective economic advantages, unfair competition and civil conspiracy as there is a dearth of evidence to support any breach of those duties by either Defendant." Conclusion of Law 21. The Court found that Wood had not disclosed any Zambelli trade secrets or proprietary information to Pyrotecnico. The Court further found that during his employment with Pyrotecnico, Wood had done only internal work, had not had client/customer contact, and had actively attempted to avoid conduct which may have been in breach of his employment agreement with Zambelli. Accordingly, the Court modified (or "blue penciled") the restrictive covenants and granted Zambelli's motion for a preliminary injunction in part. Specifically, the Court modified the restrictive covenants as follows:

NON COMPETITION

7. During the term of this Agreement and for a period of two years following termination of this Agreement (FEBRUARY 22, 2008), for any cause whatsoever, Matthew Wood shall not directly or indirectly, either as an employee, owner, or otherwise, anywhere within the geographical area of Continental United States engage in any manner in the DESIGN AND/OR CHOREOGRAPHY OF AERIAL pyrotechnic business DISPLAYS and Matthew Wood AND ANY SUCCESSOR PYROTECHNIC EMPLOYER shall not take any position of employment or ownership with any company or companies engaged in the sale or production of pyrotechnic displays if that company does any business in the aforementioned geographical area. Matthew Wood for two years following termination of this Agreement shall not contact or solicit business with or from any customer, customers, client, OR clients OF ZAMBELLI, or any other person or entity with whom he WOOD had business contact as an employee, agent or representative of Zambelli during his period of employment. Nor shall Matthew Wood during two years following termination of this Agreement act in any manner either as an employee, owner, consultant, agent, principal, employer, partner, corporate officer, or in any other capacity in any manner INDIVIDUALLY OR PERSONALLY engage or participate in any ACTIVITY business that is in competition, in any manner with the business of Zambelli. During the aforementioned two year period, Matthew Wood shall not directly or indirectly solicit or entice for employment any employee of Zambelli. Matthew Wood acknowledges that each of the restrictions set forth in this section is a material condition of this Agreement to employee Matthew Wood, and further, that the parties believe such restrictions are reasonable in duration and scope and that a breach thereof will cause irreparable harm to Zambelli and therefore Zambelli will be entitled to temporary and permanent injunctive relief in addition to all other remedies entitled to at law or in equity.

Wood and Pyrotecnico appealed. On January 15, 2010, the United States Court of Appeals for the Third Circuit issued a precedential opinion which dismissed Pyrotecnico from the case on jurisdictional grounds and affirmed the enforcement of the 2005 Employment Agreement as "blue penciled" by this Court. The Court of Appeals remanded the case with instructions to impose a bond in connection with the previously issued preliminary injunction. ...


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