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Geodecisions, A Division of Gannett v. Data Transfer Solutions

December 3, 2010

GEODECISIONS, A DIVISION OF GANNETT FLEMING, INC., PLAINTIFF,
v.
DATA TRANSFER SOLUTIONS, LLC,
/B/A DTS, DEFENDANT



The opinion of the court was delivered by: Yvette Kane, Chief Judge United States District Court Middle District of Pennsylvania

Chief Judge Kane

MEMORANDUM

On October 22, 2010, Plaintiff GeoDecisions ("GeoDecisions") filed this action alleging breach of contract and requested injunctive relief. (Doc. No. 3.) Plaintiff alleged that Defendant had extended offers of employment to twelve of its employees in clear violation of a valid non-solicitation agreement between the parties. (Id.) On Plaintiff's motion, the Court entered a Temporary Restraining Order on October 22, 2010, enjoining and restraining Defendant Data Transfer Solutions ("DTS") from employing any person employed by GeoDecisions since May 28, 2010. (Doc. No. 6.) On October 26, 2010, DTS moved to dismiss for lack of jurisdiction. (Doc. No. 11.) The Court authorized discovery on the jurisdictional issue and dissolved the Temporary Restraining Order, pending a determination of jurisdiction. (Doc. No. 18.) On November 15, 2010, the Court denied DTS's motion to dismiss for lack of jurisdiction and reinstated the Temporary Restraining Order. (Doc. No. 27.) Following briefing by the parties, on November 29, 2010, the Court held a hearing on GeoDecisions's motion for preliminary injunction. For the reasons stated herein, the Court will grant the motion.

I. BACKGROUND

GeoDecisions is a division of Gannett Fleming, Inc., a Delaware corporation, and has its principal place of business in Camp Hill, Pennsylvania. (Doc. No. 1 ¶ 1.) DTS is a Florida corporation and has its principal place of business in Orlando, Florida. (Id. ¶ 2.) Both companies are direct competitors in the information technology field and have historically competed for projects throughout the United States. (Id. ¶ 13.)

Kevin Switala is employed by GeoDecisions and works in Philadelphia, Pennsylvania. (Hearing Tr. at 24:15.) In April 2010, Switala attended an industry meeting in California where he met David Buckley, a DTS Vice President. (Plaintiff Exhibit 2.) On April 27, 2010, Switala received an email in which Buckley proposed that DTS and GeoDecisions "consider teaming" on a project in California known as "SD REGIN." (Id.) On May 28, 2010, Buckley, Switala, and Allen Ibaugh, CEO of DTS, spoke on a conference call regarding the SD REGIN project as well as "other possible teaming opportunities, beyond the immediate SD REGIN." (Plaintiff's Exhibit 3.) Later on May 28, 2010, Switala emailed a Mutual Nondisclosure Agreement ("Agreement") to Buckley and Ibaugh. (Id.) Switala requested that they review the document "and if acceptable, sign and email it back to me so I can do the same on my side." (Id.) Switala further advised that they were welcome to suggest alternative terms. (Id.) Trey Fragala, COO of DTS, reviewed and signed the document on behalf of DTS, and on June 10, 2010, Switala forwarded a fully executed version of the Agreement to DTS. (Plaintiff's Exhibit 5.) According to Switala, he did not engage in any further substantive discussions with DTS regarding the SD REGIN or other projects following mid-July 2010. (Hearing Tr. at 47:9-14.)

The Agreement, which is the subject of the present action, has been signed by representatives of DTS and GeoDecisions. (Plaintiff Exhibit 6.) It was effective as of May 28, 2010, and is largely concerned with protecting confidential information that may be disclosed "[d]uring the course of discussions between the parties relating to and for the purpose of developing a mutually beneficial business relationship." (Id.) Of particular note, Paragraph 16 of the Agreement states in full:

For a period of two (2) years from the date of this Agreement, neither party shall solicit for employment or employ any person employed by the other party, or otherwise encourage any person to terminate employment with such party. (Id.) The Agreement contains no further limitations of any kind on the scope of the "no-hire" provision and purports to be the "complete and exclusive statement of the agreement between the parties." (Id.)

In mid-October 2010, DTS extended offers of employment to twelve GeoDecisions employees: Connie Gurchiek, Jesse Jay, Rodney Bunner, Steven Korzekwa, William Schuman, Ryan Reich, Fred Riethmiller, Kristine Barry, Jeff Bible, Chris Grubb, Deepa Kini, and Don Kiel. (Hearing Tr. at 52:3-7.) DTS was aware that these individuals were employed by GeoDecisions when it extended the employment offers. (Id. at 52:8-10.) Most of the individuals resigned their positions at GeoDecisions in mid-October 2010. (Id. at 89:17-21.) Specifically, Connie Gurchiek resigned her position at GeoDecisions on October 14, 2010, and Jesse Jay resigned from GeoDecisions on October 15, 2010. (Id. at 76:19-23; 84:16-17.) DTS has also extended an offer to Mike Wiley, another GeoDecisions employee. (Id. at 52:17-20.) At the hearing, Anthony Pietropola, President of GeoDecisions, admitted that he was aware that Connie Gurchiek was going to work for DTS and that he did not mention the Agreement to her. (Id. at 100:23-25; 101:1-4, 19-22.) Pietropola further stated that he did not have a conversation regarding the Agreement with any of the departing employees. (Id. at 101:23-25.)

GeoDecisions's General Counsel Barbara McLemore sent a letter dated October 18, 2010, to Mr. Ibaugh and noted that DTS had extended employment offers to several of GeoDecisions's employees. (Defendant's Exhibit 8.) In the letter, McLemore advised Ibaugh that GeoDecisions would be monitoring DTS's future activities to ensure protection of its interests. (Id.) However, the letter did not make note of the Agreement.

At the hearing the parties stipulated that:

[T]he plaintiff is not relying on the allegations in the complaint or the affidavit of Tony Pietropola regarding, one, the alleged sabotage of the Texas DOT tracks project by former GeoDecision employees Gurchiek and Jay, the alleged downloading or e-mailing by former GeoDecision employees of confidential business information of GeoDecisions, the alleged loss of potential customers to DTS due to DTS's alleged acquisition of GeoDecisions's confidential information from the individual employees, the alleged use of GeoDecisions's business and customer records by the former GeoDecision employees to contact and solicit GeoDecisions customers for their benefit and the benefit of DTS, and the alleged misappropriation by DTS and the former GeoDecision employees and the alleged use of such information to compete with GeoDecisions. (Hearing Tr. 133:1-14.)

II. STANDARD OF REVIEW

GeoDecisions's motion for a preliminary injunction is governed by Rule 65(a) of the Federal Rules of Civil Procedure. An injunction is an "extraordinary remedy" that is never awarded as of right. Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 375 (2008). "A party seeking a preliminary injunction must satisfy the traditional four-factor test: (1) a likelihood of success on the merits; (2) he or she will suffer irreparable harm if the injunction is denied; (3) granting relief will not result in even greater harm to the nonmoving party; and (4) the public interest favors such relief." Miller v. Mitchell, 598 F.3d 139, 147 (3d Cir. 2010) (citing Child Evangelism Fellowship of N.J. Inc. v. Stafford Twp. Sch. Dist., 386 F.3d 514, 524 (3d Cir. 2004)).

III. DISCUSSION*fn1

GeoDecisions asserts that it has satisfied the requirements for injunctive relief and that the no-hire provision should be upheld as a reasonable partial restraint on trade. DTS counters that GeoDecisions fails to establish any of the four requirements for a preliminary injunction. It argues GeoDecisions is unlikely to succeed on the merits because the no-hire provision is invalid and that the Agreement is void under the doctrine of frustration of purpose. DTS further asserts that GeoDecisions has not suffered irreparable harm, that DTS and the employees at issue will be injured by a preliminary injunction, and that enforcing the no-hire provision is against public policy.

A. Likelihood of Success on the Merits

1. Validity of the No-Hire Provision

Initially, in addressing the likelihood of success on the merits the Court must consider the nature of the Agreement at issue here, specifically the no-hire provision. GeoDecisions argues the contract is nothing more than a standard commercial agreement "involving, at most, a partial restraint of trade." (Doc. No. 33 at 7.) DTS counters that the Agreement is a restrictive covenant akin to an employee non-compete clause. (Doc. No. 13 at 10-11.) The parties have not identified any Pennsylvania cases squarely addressing a similar no-hire provision in an agreement between two corporations. Other courts considering the issue have found that although such no-hire provisions do impact an employee's ability to obtain future employment, they are not properly characterized as covenants not to compete or restrictive covenants between employer and employee. See, e.g., Therapy Servs., Inc. v. Crystal City Nursing Ctr., Inc., 389 S.E.2d ...


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